Louisville Home Prices Drop: Sellers Mourn, Buyers Rejoice

The Wall St. Journal doesn’t focus on our local market but the points they make for the country as a whole can be applied to our situation.

Chart of US home price changes from 1 year ago
Home prices continue to drop, in some places far more than others. Kentucky fares worse than Tennessee, and Indiana but better than Ohio.

For some time now, I’ve been touting the “Big 3” real estate market factors as being enticingly positioned for home buyers. It seems WSJ agrees.

Despite all the gloom, however, there are growing indications that it is a good time to buy. Mortgage rates, which fell to 4.55% for the week ending June 2, according to Freddie Mac, are near 50-year lows. Homes have become more affordable than they have been in years: According to Moody’s Analytics, the ratio of home prices to income is now 20.9% lower than the 15-year average through 2010, and 12.5% lower than the 1989-2004 average. A historic glut of homes, meanwhile, has created a buyer’s market: There were about 15 million vacant homes in the U.S. last year, according to John Burns Real Estate ConsultingInc.—some 3.1 million more than normal.

Interest rates are at historically low levels, home prices have dropped to unimaginable levels (even here in Louisville) and there’s a large number of homes for buyers to choose from; all three factors point in a positive direction.

Let’s look at just how low Louisville home prices have dropped. The graphic above shows the April home index as compared to one year ago. According to the data they used to make this map, Kentucky homes have lost 6.7% of their value in the past 12 months. Scary.

FHFA Housing Index for Louisville

Another source for data that I’ve used over the years doesn’t paint such a scary picture, at least for the Greater Louisville area. The Federal Housing Finance Agency has published the first quarter 2011 house price index to be -0.32. Going back for the past four quarters using their data only ends up with a -1.72%.

So which is it, 6.7% or 1.7%? Each index is formulated differently and it appears that Louisville is performing better than other parts of the state but it doesn’t explain the large difference between the two numbers.

Greater Louisville Association of Realtors has data too!

When in doubt, I like to go straight to the source—our Multiple Listing Service (MLS). The median sales price for April 2010 was $135,000 (average Louisville home price $160,442). For April 2011 the median dropped to $127,000 (average $155,243). So the median home dropped just under 6% while the average dropped 3.3%. It’s been a tough year for home sellers while home buyers are cleaning up!


Everything always comes back to your personal situation. If you’re downsizing, now may not be the best time for you. But if you are currently renting or moving up in home price buying now, while the market is favorable, would be a wise investment.