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Last week the latest Residential Price Index was released, and it showed that average property prices dropped in August, despite decent sales volume of existing houses (including investment property).  However, as we all know from high school economics, when supply exceeds demand, prices decline.  And supply is high right now due to the continuous introduction of foreclosures into the real estate market, an increased number of short sale transactions, and a reduced number of qualified buyers (thanks to tightened lending standards and the horrific economy in general).

Nationwide, average home prices in August (non-distressed properties) only declined 0.8% month-over-month, but remember that this is after 2 years of depressed property values.  The year-over-year decline averaged approximately 5% across the US.  So obviously, as of August 2011 at least, national market prices have still not yet hit rock bottom.

On a month-over-month basis, Chicago’s and Detroit’s home values performed the best, while the biggest declines were found in Portland (-3%), Minneapolis (-2.8%) and Washington DC (-2.7%).

On a year-over-year basis, Detroit experienced the largest increase (+7.8%) thanks to the reemergence of the automotive industry, followed by Boston (+2.2%) and Houston (+1%).  The areas with the largest drops in YOY property value were Orlando (-14.2%), Las Vegas (-11.8%) and Atlanta (-10.8%).

If we look at year-to-date numbers, the picture gets slightly better; Boston, Dallas, Detroit, Houston, Minneapolis, and San Francisco have all seen YTD gains in average home prices (between 3.5% and 5.5%).  However, Las Vegas, Miami and Orlando are still down even on a YTD basis (-6.8%, -5.8% and -5.3%).

So as you can see, the prognosis for a quick market recovery is simply not in the cards.  In fact, it really seems like we haven’t even hit the bottom yet.  Therefore, my advice remains the same as it has all year: if you can, go out and buy an investment property or two.  And if you plan to sell, I would suggest holding for another 2-3 years to let the market recover.  I know being a landlord is not fun, especially if you’re in the mindset that you’ve had it and you’re ready to sell, but you’ll be able to sell your properties for at least 10% more in 2 years than you could right now, so in my estimation it’s worth holding out.

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