Everybody Calm Down. Armageddon Is NOT Upon Us!
CNBC report 9/2: “Pending sales of previously owned U.S. homes rose unexpectedly in July … suggesting a tax credit-related housing market decline was close to bottoming.”
ORIGINAL POST
The new housing numbers have definitely been a major news story over the last 48 hours. The Dow dropped over 100 points on the announcement of July’s existing sales numbers. The cries of a double-dip sound like the screams of Chicken Little: ‘The sky is falling! The sky is falling!’ Pundits are claiming real estate will never be looked at the same again. We asked Steve Harney to comment on what the report actual means to the housing recovery. As always, he was more than willing to share his insights. – The KCM Crew
I want to start by saying that Armageddon is not upon us. Was NAR’s Existing Home Sales Report tough to read? Yes. Were there any surprises in the report? Just one: the fact that prices have remained stable. And that was good news.
All the panic and gut-wrenching revolves around two numbers:
- The lack of sales in July
- The months’ supply of inventory now available
Neither number was a surprise to anyone truly following the real estate market. Right here in this blog, the KCM Crew has been claiming for the last nine months that sales in 2010 will be approximately what they were in 2009. The tax credit moved many purchases forward as buyers wanted to be in contract before the April 30 deadline. That push forward of demand created a false sense of hope that a major market comeback was taking place in the spring. It also created this current vacuum of demand during the summer.
Just as we should have realized that the great market of the spring could not be sustained, we must now realize that plummeting sales numbers will not continue. It may take one or two months for the impact of the tax credit to fully dissipate. After that, we will see a more normal buyer demand throughout the fall and winter. We must not forget that people decide to move every day. Prices are great, interest rates are at historic lows and the assortment of properties for sale is fabulous. Buyers will buy!!
In regard to the months’ supply of homes for sale, we must remember one basic principle: prices will come down if demand is constant and inventory increases. Houses will sell over the next twelve months, approximately 5 million of them. There may be more than double that amount trying to sell however. Which ones will sell? Those that are priced correctly for the current market. Your price must be compelling in order to make your home attractive to today’s buyers who have a tremendous selection of homes from which to choose.
As the year moves forward, it is my belief that months’ inventory will remain in double digit numbers. That means that prices will continue to soften.
What does this mean to you?
You definitely will be able to sell your home and move on with your life. If that’s the goal, you will do better financially if you do it sooner rather than later.
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Steve,
Any advise with regard to timing in the Las Vegas market. With retirement within our view, what to do? House was purchased in 2001, ballooned now flat Thank you
Hi Diane,
Do you live in Vegas now or are you thinking about retiring there? If not in Vegas, where do you live currently?
Steve
Thank you for being so uplifting and honest. We need folks to be prepared, educated, and not afraid…so we can rebuild this business and most importantly this country even BETTER than it was before. Your words help to get us on that path…education on the reality of what is actually happening in business, so we can stay focused, while educating our clients.
THANK YOU
Theresa
Steve, may I have your permission to print this out to use as a handout at my open house on Sunday and for others?
Steve, as always, these are words of wisdom! The market is tough. But it is what it is and we need to move on and get on with doing business.
I completely agree with your analysis about the effect of the tax credit dissipating over time, but I would like to add that we should expect that the month-over-month sales comparisons going forward through November are also likely to look dismal since we are comparing a time in the market bolstered by tax credits vs. today’s market absent any government tax incentives. I think that particularily in November we will see the biggest drop in sales compared to last year since that was when the first round of tax credits were to expire and buyers rushed to close sales before the November 30th deadline. Nevertheless, it’s not armegeddon……
Steve – Ii would like to print this out and pass it on to my customers. Is that ok. Thanks.
Steve,
My retweet of your story said and I quote “Sound bites….Bite! You have to read the whole story” followed by your link. Thanks for your article I am grateful for your take on things and often use them on my appointments with clients with a nod to you and your clan.
Thanks again!
Julie Keelan
the Keelan Realty Group
Allen Tate Realtors
Hey guys, if anyone is wondering whether or not it’s okay for them to share or print out this blog post, the answer is YES! We just checked with Steve and he WANTS you guys to share and redistribute it however you want. Share it with your community! Feel free to post it on your website, your Facebook page, your Twitter page, and even your own blog!
Steve, I agree wholeheartedly with your analysis. The tax rebates created a lot of activity late last year and early this year, which skew comparisons. The media, of course, jump on the negative data, while you very cogently interpret the nuances and details…thus, it’s not Armageddon.
Thanks for sharing your knowledge.
Barbara Bach
Realty Executives West
Long Island, NY
My Mom is thinking of refinancing, still in a wait and see mode. Do you think there is any indication that the interest rates would tend to lower a little more over the next few months or longer term until the inventory moves quicker in sales and the real estate market starts to rebound?
Hi Tom,
No one knows for sure where rates will be in six months. Most believe that they will remain where they are for some time. If it were my mom, I would tell her to refinance now and get on with other things she wants to accomplish. Hope this helps!
Steve
I’m so glad you published this today! I’ve been getting worried emails so I spent some time updating stats to show that in fact Montgomery County MD is doing fine. We’ll see how the fall market plays out but for now we are holding our own!
Thanks for inspiring me to do this today.
Steve, Timely article. I just discussed this very topic with a potential seller today. They were concerned if it was “hopeless” to sell. I made the same points you referred to and calmed their concerns. These were not upside down/under water/etc sellers either. They are the type we want out there. So thanks for the article.
Thank-you so much,
Missy Lettinga
Greenridge Realty, Inc
Grandville, MI
Just posted to face book. I will see what the reaction is.
Thanks for sharing. I am going to send this to all of my seller.
Jack
Well said; thank you!
Steve,
As always you inspire those of us that are dedicated to do the best for our clients and I sincerely appreciate all your blogs and information that is relevant in today’s market. Thank you and your clan always for your posts and market details!
OLD NEWS….KCM members have been up on this for months now. This definitely substantiates what I’ve been teaching my clients. Thanks Steve!
Thank you for this article today. I work in mortgages and the market worries the majority of us.
Wonderfully positive article and full of passion and truth. Thanks Steve!
I believe you are overly optimistic. Our market here in Chicagoland is very weak.
I have been in the business 38 years and see no reason why this fall and winter will not see exactly what we have seen in May, June, July and August, which is few contracts, fewer buyers, and loads of homes for sale. We need the tax credit again to get housing going in America!
Hi Steve,
There is no doubt that things are more difficult now than at any time in my real estate experience (I have 25+ years in the business). I also know how tough it is in your market as I have had the honor of speaking on the Chicago market several times in the last year. That being said, I believe that buying demand will pick up this fall and I believe that sellers will start realizing that they have to list their properties at a compelling price to get it sold. The market will return when pricing is adjusted. Take a look at today’s blog about pricing.
Also, check the blog tomorrow and Wednesday as they will also discuss pricing.
Hi Steve,
I’ve just started reading your blog and I find it fascinating. I’m not a real estate agent. I have a home staging business and I find it extremely critical for me to understand what’s happening out there so that I can help both the home seller and the agent to sell their property ASAP. (Hence why I’m on your mailing list AND why I’ll be attending one of your seminars!) Price IS key but with so many homes being “priced right”, the differentiator then becomes the home’s features and appearance. I’ve seen properly staged homes beat out the competition in virtually every case. So, as you’ve said, buyers WILL buy. But home sellers need to be convinced by their agents that they have to work a bit harder on their end to get their property prepared for the market.
this post is very usefull thx!
Could be the BEST thing that I read this week!?
Francesca
This is such a deep blog! What can I say, youve hit the nail right on the head! You even added some videos to make it seem so much more real. Youve got a great way of communicating with the reader, a great way of making me feel like what you have to say is just as important to me as it is to you. Keep it up!