Louisville KY Real Estate Market – Review of 2007

Posted by Jonathan Karlen on Friday, September 2nd, 2011 at 11:57am.

louisville ky real estate marketIf you just read the national reports on how the real estate and homes market is faring across the USA, its mostly doom and gloom.  A record number of foreclosures, squeezing by the mortgage industry and tightening of credit along with the market falling in many real estate markets, has consumers believing that its a national pandemic for real estate right now.  Nationally, there was a decline in new home sales of 9% in November 2007.  Home sales overall are down 20%.  And the median sales price for home values has decreased by 3.3% from just a year earlier in 2006 with the home values median price being $210,000 for November 2007.

That being said, many of the markets that are seeing “hard times” currently – are the same ones that saw 30% appreciation PER YEAR or more for literally years.  Consumers started leveraging themselves buying as much home as they could possibly get into – on the theory that they didn’t need equity to get in, because the real estate values were increasing so fast, that they would have equity in the property in a few months just from appreciation.

The big thing to remember is that real estate is local.  And while the Louisville KY real estate market is not completely immune from the real estate downturns that you are seeing unfold in many other parts of the country, we have not had the same rates of sky rocketing appreciation that they did.  This has resulted in the Louisville KY real estate market being stable with consistent, but conservative growth.

To cite one market in the Louisville real estate metropolitan area, is Shelby County Kentucky.  In 2005, the average sale price for a home was $191,500.  For 2007, the average is over $199,000.

While not amazing growth on appreciation, it is moving in a positive direction.  And the rate of increase should continue upward.  Right now, the biggest limiting factor for our market is probably the amount of inventory out there.  For 2005, 354 properties were on the market that went unsold.  For 2007, we closed the year with 520 properties on the market that went unsold.

But, as the market moves along, we should start seeing that number decline somewhat.  The national economy does play a larger role on real estate developers, construction and new homes for sale in Louisville KY.  Keeping with our example of Shelby County KY real estate, the amount of permits that were issues for family dwellings (which includes everything from single family residential homes, all the way to apartments), was only 289 for 2007.  That figure represents an approximate 28% decrease from 2006 for permits that were issued by the Triple S Planning and Zoning commission.  And is substantially lower than the all time high of 657 that were issued in 2004.

The Louisville real estate market remains poised for some extremely strong growth in 2008.  Estimates for potential appreciation range from 5% – 17% for this year.  If you are considering making a real estate purchase, or just looking to move up from existing home to something larger and more expensive – NOW is the time to do it.  The average consumer still has the perception that the market is soft, and with inventory being high, there are some motivated sellers out there that may be willing to cut a real deal to get out from under their home.  Add in the continuing currently low interest rates for financing available, and there is a real opportunity for investors, and even individual home owners to pick up some real deals.

Look at this way, even if you have to lower your price on your cheaper home by X% – you can make up for it by purchasing a more expensive home, because X% of a low price is always going to be less than X% of a higher price.  Just using some made up numbers so you understand what I’m saying:

Lets say you have a $300,000 home currently.  You want to buy a $600,000 home.  Real estate values are down 3% (they aren’t, but play along with me).  This means that 3% off the $300,000 home is 9 grand that you are discounting to get it to move in today’s market.  BUT, you also pick it up on the other end:  3% off a $600,000 home is 18 grand.  So you make a net of 9 grand by moving up (18 grand – 9 grand = 9 grand).

And that doesn’t even take into account that in general, the more expensive homes are having a harder time selling.  This means that there is even more potential opportunities to negotiate strong and pick up a deal and get even a larger discount from the market value that the home is going to be worth in a few months as the local Louisville real estate market starts picking up and consumers become aware of the momentum.

And even if you don’t want to sell your existing home – its still a good time to buy.  Many Louisville real estate investors are having a hard time carrying their debt load and are having to unload their properties just to get out from under their debt service and monthly mortgage payments.  Many renters have been able to get out of renting and have been able to get into their own home due to the low interest rates and various government programs and incentives that are out there.

I know what your first thought is going to be immediately:  Well, if investors are going to have to get out from under their debt service, why would I want to buy something thats not doing very well right now anyway?

The answer to that is obviously easy – and allow me to use an example.  When do you want to buy stock in the stock market?  Do you want to buy when everyone is selling?  or Do you want to buy when everyone is buying?

Obviously, you want to buy stock in the stock market when everyone is selling.  This means you are getting the lower purchase costs due to everyone else’s desire to sell.  If you wait until everyone is buying, you’ll be caught up in the same momentum as everyone else, and end up overpaying for your stock.

Basically:  you want to be doing the OPPOSITE of what everyone else is doing to make money.  You want to buy when everyone is selling.  And you want to sell when everyone is buying.

The same exact principle applies in real estate.  Right now, the perception is that the market is soft, and that values are down and you need to just get what you can out of a deal to get out from under the mortgage payment.

This is exactly the opposite of what should be happening.

You should be buying, buying, buying.  And buying some more.

The real estate market will change.  All indicators and predictions for the Louisville real estate market indicate that Louisville Kentucky is poised for strong growth and appreciation for its market.

And Mr. Greenspan has already predicted that within a few years, interest rates will be hitting double digits within a few years.

So, what does that mean?  That means that all those persons that have purchased their own homes will be feeling the crunch from rising interest rates on their adjustable rate mortgages, and they will need to get out of those homes and go back to renting.

So, you can buy a home now for a heavy discount.  Lock in a low interest rate.  Gain appreciation for the home thats expected to happen this year in 2008.  And then if you are so inclined, rent it out for a hefty some above what you would normally expect to get (due to supply and demand) to get even more money and equity out of the property.

Additionally, demand for land and Kentucky horse farms for sale have risen sharply.  Part of the reason for the increased demand has been the Kentucky Breeders Incentives.  These incentives have stimulated a tremendous amount of interest from many horse farms owners across the country to want to relocate to Kentucky so that they can participate in the Kentucky Breeder Incentives program.  This is leading toward increased demand for land, acreage, and farms in KY.  And if you add in the excitement surrounding the World Equestrian Games to be hosted in Lexington Kentucky in 2010, the demand for horse farms between Louisville and Lexington KY has increased remarkably.  Persons are looking for both places to rent for their horses during the event, as well as some are purchasing horse farms for their use in putting in a satellite operation from their main farm wherever they may be.

Anyway you slice it, the Louisville KY real estate market is shaping up for an exciting time in 2008.  Don’t miss out!

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