Are home values really inflated?

For the 71st month in a row, the housing market experienced year-over-year gains. As of January, the median existing-home price for all housing types was $240,500, which was a 5.8 percent increase from January 2017 ($227,300). According to Bob Schwab from Finance of America, this may lead many to believe that home values are overinflated.

Schwab, and Zillow, disagree with that common opinion. Zillow says: “If the housing bubble and bust had not happened, and home values had instead appreciated at a steady pace, the median home value would be higher than its current value.”

I’ve pulled some information and graphs from Schwab’s article to help demonstrate why home prices are exactly where they should be. First, a graph showing actual median home sales prices from 2000 through 2017:

By itself, this graph shows home values rising early in the century, then tumbling down, and now climbing back up. This may give off the impression that a pattern is emerging, and another tumble is coming. But, if you look at this second chart, indicating where prices would naturally go with the market had there not been a boom and bust, you see something different:

The blue bars represent where prices would have been if they increased normally, at an annual appreciation rate of 3.6 percent. By adding that percentage to the actual 2000 price and repeating for each year, we can see that prices were overvalued during the boom, undervalued during the bust, and a little bit lower than where they should be right now!

All in all, thanks to Bob Schwab for pointing out that we should be comfortable with current home values, and understand that the market actually isn’t overinflated, based on historic appreciation levels.

Hotel Boom in Walnut Creek?

As prices for housing, hotels and, well, pretty much everything continue to skyrocket in San Francisco, travelers are starting to realize they can stay in the East Bay and BART to and from the city in order to save a lot of money. This will have a direct effect on Walnut Creek, which is right on the BART line and becoming a hotspot anyway.

New hotels are being reviewed for Walnut Creek, including a 160-room business traveler-targeted Marriott Residence Inn near BART (where the Jaguar/Range Rover dealership and Bank of the West are currently situated) that would open this time next year. The city has also reportedly discussed a boutique hotel being built in the downtown corridor.

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On one hand, this means more visitors discovering our beautiful little city and, therefore, more of a boost to the local economy. On the other hand, it means even more crowds and traffic. Higher prices for food, movie tickets and shopping. More loud, rowdy party-goers hopping from Crogan’s to Tiki Tom’s to Stadium Pub. You take the good with the bad.

Either way, if this hotel boom in the East Bay continues, it will accelerate Walnut Creek’s transition from small suburb to a must-visit Bay Area destination. I have already heard a few opinions of how people feel about Walnut Creek’s growth…please share your comments too! It’s always a hot topic.