Real estate’s mixed messages
My brain is on fire and yours should be too. With all the mixed messages we’ve been getting about the health of the country’s housing market, it’s enough to melt what’s left of your brain cells.
If you follow the real estate statistics and the analysts who interpret the statistics, it’s hard to find any consistency. For example during the month of May, I found five different reports in a variety of publications related to the housing market, all with a slightly different take.
One headline said “Housing ends slide but faces a long bottom.” This piece stated that after almost six years of falling home prices, the market appears to be near the bottom. It continues that being at the bottom is certainly not the same as a real recovery, rather just a prolonged bottom. Sounds not too bad until the end where they take away the glimmer of hope you allowed yourself to have and say there is still plenty that can go wrong, so don’t get too excited.
The next one totally disagreed with the long bottom theory. Based on the April numbers, new home sales, which account for 10 percent of housing inventory, rose 3.3 percent from March to April and were up 9.9 percent from a year ago. In addition, previously owned homes have also shown gains rising 3.4 percent in April from the previous month. In addition, the median price for new homes was up 5 percent from a year ago, no percentage in this piece about resale prices, which we have to assume were down. Starting to see the problem?
Moving on, I loved the headline “Stunned home buyers find the bidding wars are back.” The only problem with this is that bidding wars in today’s market are significantly different than bidding wars during the go go real estate years. Today’s bidding wars are the result of tighter inventory in certain select markets, probably because sellers have chosen to keep their properties off the market hoping the trend reverses before they must sell. The bottom line is even lucky homeowners who have more than one buyer making offers on their home will still be looking at selling for prices far lower than a few years ago.
Next we have “Housing market crawls back.” This left me with the image of a bunch of houses with little legs on their knees climbing uphill. Apparently the image they wanted to convey was that housing prices, although they fell in March, didn’t fall as much as in earlier months. I think the term for that is spin. If nothing else, it’s certainly a measure of how bad the housing slump has been that a flat index is seen as good news.
Finally in mid-May, the Wall Street Journal ran a special section on personal finance. The real estate question asked was “Is now the time to buy your first house?” and I sincerely hope that anyone who is actually thinking of buying their first home will not read this. The very qualified economists who shared their opinions in this section were exactly opposite in their advice.
The “Yes: It’s a rare opportunity,” expert said this could be the best time in a generation to be a first time home buyer. He supported his theory pointing to rock bottom mortgage rates and housing prices.
The“ No: The fall isn’t over” guy said if you buy now you have to be willing to lose 20 percent of the market value in the next several years or more. His view is that shadow inventory in the form of future foreclosures and sellers who have thus far been holding back is a bad indicator. Once these properties come on the market, values will not have a chance of recovering.