My Home Is Dropping in Value?

I’m sure you’ve heard the phrase, “Perception is reality”. Take the value of brands, for example. People’s perception of Tylenol as a safe, pain-reducing medicine prior to 1982 was sky-high. It was the world’s top seller, for crying out loud. Then reports surfaced that a woman died from cyanide poisoning from taking Tylenol.

It turns out the medicine was tampered with after the product shipped and was on the shelves but that didn’t stop a massive drop in worldwide sales. The perception was that this brand was potentially dangerous and human activity adjusted accordingly.

Louisville Home Values Hold Steady, National Values Drop

Now you might be asking why a real estate blog would be talking about brand image and perception. Here’s the question I hear, “My Home Is Dropping in Value?” I mean, other than a 100-year-old tree falling on your house (this happened to my parent’s home, by the way, thankfully no one was injured and the repairs will be far less than they could have been) and truly destroying a part of your home, it’s actually perception (along-side supply and demand) that drives what someone will pay for it.

Let’s look at a super cool chart that AOL has on their site. The blue line is for the average sales price in Louisville, KY while the gray is the average estimated National value.

Chart of Home Values from 2006 - 2010 Louisville KY and National -Figure A
Back in November 2006 the average estimated value of a home in Louisville, Kentucky was $151,195.

It’s not difficult to notice that the National average is far higher, right?

Chart of Home Values from 2006 - 2010 Louisville KY and National -Figure B
Contrast that Louisville home price with the National Average at that time of $315,091.

When we move forward in time we see that Louisville home values have remained roughly the same. (It would be nice if they updated their data more regularly but what can you do when you’re the Internet’s most famous, dying mega-brand.)

Chart of Home Values from 2006 - 2010 Louisville KY and National -Figure C
In June 2010 home values were at $153,519.

The change in that time frame amounts to a modest 1.5% increase. As I’ve said for years, Louisville real estate would be a boring roller coaster. Contrast this change to what’s happened nationally.

Chart of Home Values from 2006 - 2010 Louisville KY and National -Figure D
According to their data, in June 2010 the national average was $235,429, a drop of more than 25% in less than 4 years.

So does what happens in other parts of the country affect us here in Louisville? Certain non-local events truly make an impact, even sharply at times. But most merely “factor in” on certain people’s perceptions while other people discount them and are unfazed.

Data Disclaimer

Housing data can be derived from many sources; published vs. non-published, including foreclosures or not, even different government agencies report different numbers for the same time period. Much like mortgage rates, you should speak with a full-time, local professional to learn about your home’s value.

At the end of the day, I remember what my father taught me when I was a kid, “Something is only worth what someone will pay you for it.”