One of the most requests I get is to see the following chart.  This is the annual median sales prices of single family homes for the past 14 years, beginning 1994 as reported by the Florida Association of Realtors.

I started with the reported MEDIAN sales prices for 1994 and added two appreciation rates inorder to see what the sales price “should” be under normal conditions.

The numbers right above the X axis shows the actual year-over-year appreciation rates for each year.

For the first 8 years in the chart above, the rate was 4.5%.  For the next 4 years, starting in 2003, the annualized rate was a whopping 14.5%.  

Even though, the average for all 14 years is 5.9%. I chose to use the more conservative 4.5% rate to see what effects this would have on the chart.  This trend line is represented by the dashed gray line.  The red dashed line is the second rate which was calculated with a 5% appreciation.

Using the trend line as a comparison point, at the end of 2008, the Jax MSA market median home price was 16% too high using the 4.5% rate and 8% too high with the more optimistic 5% rate.

But each year the rate continues to compound.  The prices for the year end “should” close 11% lower on the 4.5% rate.  If prices fall another 10% for the year our market will be where it should have been at all along.

What we don’t know - and, only time will tell, is how long under the 4.5% trend line the market will remain before the natural market forces respond to the improving value/price propositions.

Here’s the link to the Florida Association of Realtors site where you can get the data first hand.