When people ask, “How’s the real estate market?” these days, I don’t know whether they are making small talk of if they are really interested in what’s happening in the national, local, or micro market. If they are interested, I don’t respond with the usual pat real estate agent superlatives: Great, Amazing, Exciting, but with the word, “Interesting”. The market cannot be easily described. There are just too many things going on that don’t make sense and too many people doing commentary. Sorry, I guess I fall into that category, too.
Let’s look at some Headlines:
Pending Home Sales Drop, Housing Market Too Reliant on Government? (Agent Genius)
We keep hearing a lot about Pending Sales (homes under contract, but not yet sold) from national and local writers and bloggers, and, reasonably, an up tic in Pendings should lead to an increase in sales down the road a month or 2 when those properties close. There was a huge up tic in Pendings as the first round of the First-time buyer tax credit was running out. Did the tax credit impact sales? You betcha.
Here’s a Similar headline from one of my favorite Real Estate Blogs, Matrix (link is active)
Pending Sales, the Tax Credit Wild card, Matrix
and another from our own Commercial Appeal:
Home sales up, pending sales plunge, sending mixed signals for November
What thes folks are writing about is that Pendings rose in October, but fell in November, as closed sales rose in November (a result of the October pendings). Duh. This kind of reporting, spawned by the National Association of Realtors, avoids dealing with the real issues in the market. Spin pendings, month over month sales, inventory however you wish, but bottom line, units sold are down 13.7% year to date, from 2008 in the Memphis market. The hoopla about the first increase in Y-O-Y sales for November is just an aberration.
For me, there are 4 major issues lingering from 2009 and carrying over into 2010, and perhaps beyond, that consumers, Realtors, main stream media, and maybe even the pundits should be watching more closely:
1. Shadow Inventory – Banks have done the foreclosures, or are legally empowered to do the foreclosures, yet we don’t see the properties on the market. This is probably the biggest factor in the touted decreased inventory, which many report as a favorable sign. Also contributing to shadow inventory is the large number of Expired, withdrawn, or canceled listings which have not gone back on the market.
[1-b - i forgot to mention that the market numbers have been whipsawed for the last 3 years by the number of foreclosure sales and the depressed prices the properties sold for.]
2. Home Values I am not talking about the ubiquitous median price number. I am much more concerned about prices at the micro level – my neighborhood, my street, my house. What are the best “comparables”?
2-a. Coming to grips with lower values – It’s really hard to tell a potential seller who bought her house in a hot neighborhood at the top of the market in 2005 that she has lost money (at least on paper).
3. Mortages – RPR, Fannie Mae, Freddie Mac, FHA, RESPA…. it’s all changing, making the process even more complicated for the consumer. Going forward, finding a competent, well educated, up-to-date mortgage person will be a lot more important than “shopping rates”.
4. Real Estate Agents and Companies- More progressive real estate brokers and companies are adapting to the ever increasing transparency of every aspect of business. New business models that don’t concentrate on the “percentage” model are making inroads. Empowered consumers will look for alternatives.
So, how about thinking about something other than pending sales, month-over-month blips, and size of inventory, and address some of the other complexities of today’s real estate market?
This blog publishes a weekly post of articles I aggregate about national real estate stories, marketing and social media. See this week’s HERE.
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