Doom & Gloom...All the Way to the Bank

La Jolla Average Prices by Decade
YEAR	AVG. PRICE	PERCENT INCREASE over previous decade
1977	$118,700
1987	$485,900	UP 409%
1997	$763,500	UP 157%
2007	$2,408,900	UP 315%

La Jolla Homeowners Gained 315% in the Last Decade
Did you know that in the slums of some rust belt cities affected by major manufacturing job losses, such as Detroit, the federal government is selling homes for as little as $1? You can’t even call them “homes,” really – they are the skeletons of homes that have been vandalized and looted and occupied by squatters in neighborhoods that aren’t safe even in broad daylight. And yet those homes – and foreclosed homes bought back by lenders who simply want to recoup the amount still owed on the mortgages and short sales by people who want to avoid foreclosure – are thrown into the mix when the powers that be decide what the national average home price is.

That’s why it’s absurd that the mainstream media is alarming the public about the housing market when it reports facts such as that the national average price has declined by 6.45 percent to $201,000 in the last year; alarming both potential homebuyers and home sellers into becoming paralyzed and doing nothing. “Nobody is buying, nobody is selling,” is the mantra of the mainstream media. Well, mainstream media, you’re a major part of the problem with the huge fall in confidence out there with your national numbers and your sob stories about people who are being foreclosed on…mostly people who didn’t do their due diligence when purchasing a home, did not read or understand their loan documents, were lied to by their mortgage broker or lied about their own incomes and bought way more house than they could realistically afford – the excuses go on and on. And second, mainstream media, you are wrong. People are continuing to buy and sell in upscale communities – such as the San Diego County coast, Orange County coast, Westside L.A., Silicon Valley, and Seattle – just as they always have, because business, outside the financial, real estate, and construction sectors, is booming. In addition, most of these upscale area homes are actually appreciating in price, not depreciating…again, just as they always have. To demonstrate this, we took a look at one community, La Jolla. The average price of a La Jolla house in 1977 was $118,700. In 1987, the average had jumped 409% to $485,900. In 1997, the average increased another 157% to $763,500. In 2007, the average price in La Jolla had appreciated another 315% to $2,408,900.

Location, Location, Location!
La Jolla 2007 average price
up 5% from year before, to $2,408,900
City of Detroit 2007 average price
down 54% from year before, to $22,000

Conclusion: Detroit’s problems aren’t so much related
to real estate trends as they are to local factors. Detroit
and other areas like it should not be included in the
calculations for the national average.
Statistics sources: The Wall Street Journal and REBA.

The average of those three huge percentage jumps is 294% per decade. Using that figure, we predict the average price will be more than $7 million in 2017 and more than $20 million in 2027.

The most important point to take away from this article is this: All real estate is local…and not just by city but by neighborhood.

Now let’s look at stocks versus real estate. Even stock market cheerleader The Wall Street Journal had this to say recently: “The stock market is trading right where it was nine years ago. Stocks, long touted as the best investment for the long term, have been one of the worst investments over the nine-year period, trounced even by lowly Treasury bonds.”

Bottom line: Buying real estate in an upscale community is still your best investment. Homebuyers and sellers need to take a longer view; years, not months or days. Compare the lack of growth in stock prices with the growth displayed by La Jolla over the past decade.

La Jolla statistics provided by the La Jolla Real Estate Brokers’ Association (REBA)