As has been widely reported, pending sales continue to outpace new listings, resulting in persistently low inventory, currently a 3 month supply. And, since January 2012 sold prices have risen approximately 15%.  The question looms:  Will prices continue to escalate, and if so, at what pace?

One year ago I posited on this Blog that prices reached a baseline at the end of January 2012, from which they would continue to rise.  I further postulated that after 5 years of deeply declining values (over a 50% drop), pent-up demand would create an initial surge in prices.  That surge is the 15% price escalation we have experienced over the past 1 ½ years.  Will that pace continue?  I don’t think so.  The economy remains weak, relying upon stimulus programs from the Federal Reserve, against Congressional and Executive inaction to implement real solutions to the systemic economic issues we face.  Considering this backdrop, there is no reasonable basis to believe that prices will increase beyond the historical 100 year average of 2% – 5% annual price increases.  In fact, that is a good thing.  Anything more would portend another bubble/bust.

The current trend supports my position that prices are stabilizing, and prices are likely to increase no more than 5% over the next year.  As the graphs below indicate, in Venice:

• Average Price per Sq. Ft. — $124/square foot was the average price for sold homes in July. It approximates the $125/square foot average for the 7 months of this year.
• Average Price — $197,000 was the average price for sold homes in July.  Likewise, it averaged $197,000 for the 7 months of this year.
• Median Price — $158,000 was the median price for sold homes in July.  Here, it was actually lower than the 7 month average of $165,000.