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Don’t Pay Attention To the Scary Headlines Coming

There are going to be some tough headlines written about the housing market over the next several months. They may create apprehension and in some cases outright fear. The good news is these headlines will not reflect what is actually taking place in real estate. Some in the industry say we should just ignore this media blitz of problematic stories. That would be similar to trying to ignore a growling creature lurking in the shadows in the corner of the room. Instead, we want to shine a bright light into that corner to honestly evaluate how dangerous the creature actually is.

PROBABLE HEADLINE: Sales Plummeting. Housing Market Crashing

THE FACTS: The National Association of Realtors’ Pending Sales Report is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed.

The pending sales reports covering September, October and November will be UGLY. The reason is that the houses going into contract in those months this year will be compared to the same months last year. In 2009, sales were skyrocketing as we headed toward the original termination of the Homebuyers’ Tax Credit on November 30. It will appear as though this year’s sales fell off a cliff in comparison. The headlines will be brutal.

Actually, the tax credit just pulled sales forward. Last fall and winter, pending sales dropped dramatically after November 30. Over the next six months, approximately the same number of homes will go into contract as did last year during this period. They will just be spread more evenly over the six months.

The National Association of Realtors’ Existing Home Sales Report is based on home closings. The extended tax credit expired on April 30 this year. Like last year, the tax credit pulled demand forward, this time from the summer months. That left a vacuum of homes going into contract during this past summer. That vacuum will create a lack of closed sales throughout the next few months.

Actual sales will be approximately the same as last year. However, because the tax credit moved sales into different time periods, both the pending sales reports and the existing sales reports will appear very weak over the next few months.

The Bottom Line

The headlines will be reporting ‘doom & gloom’. In reality, the market will be no worse than last year. There will be no reason to fear the creature in the corner. It will be a figment of a misinformed media’s imagination.


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20 replies
  1. Jay Teresi
    Jay Teresi says:

    Spot on again. In addition, take a step back and look at your market from a macro-level. As a broker or an agent: How many transactions have and will take place in your market this year? Are there enough for you or your company to reach YOUR goals? Of course there are, and they will be available next year as well. you always have to keep in mind that the real estate market in the US grew at a more predictable rate until 2000. Before then, agents and brokers realized that we don’t “create’ transations, we facilitate them. We weren’t as focused on how many MORE transactions will be there next year. The strong will survive this time as well and grow market share against those who are not the experts in their markets. Longevity and prosperity will come to those who are educating their buyers and sellers, those who are offering the latest technologies to consumers to be confident in their decision that now is a great time to buy given the lower prices and mortgage rates. And also to those who confidently show sellers that any property will sell in any market if it is priced properly.

    Reply
  2. Allie
    Allie says:

    First, thank you. I know this is coming however, I have been waiting to blog or comment to clients. Now is the time to be pro-active.
    Do you have any advice on how we can get the press to help us instead of cause even more damage?
    Allie

    Reply
  3. Sandra Matson
    Sandra Matson says:

    Thank you for this post. The media does nothing to serve an economic recovery. Most people read the headlines and panic. If all the facts were properly reported, I believe it would do much for consumer confidence.

    Reply
  4. Jimmy L. Chisolm
    Jimmy L. Chisolm says:

    Hello Steve,

    Steve you NAILED it again! i wish you could be in front of the media outlets instead of some of the improperly informed talking heads who are just seeking recognition or attempting to position themselves to benefit in some form or fashion from the negative reports that they convey to the public, because then the general public would be better informed, less anxious, and more willing to take advantage of the great interest rates and really low prices that are availiabe out here now.

    Reply
  5. Dawn Marie
    Dawn Marie says:

    Perfect! And then there is Hawai’i … O’ahu to be specific. This is where home sales have increased by 22%, condos by 27.5%; prices by 4.4% and 1%, respectively. These stats are island-wide so “micro” neighborhood figures vary widely, with East O’ahu leading the market as usual. Our inventory has been hovering at +/- 6 months since early-2010 and DOM reduced by 38.5% (homes) and 40.7% (condos). Our luxury market shows signs of new life as well with areas such as Waialae/Kahala sales up by 83% and prices up by 45%. And those interest rates! Second home Buyers can borrow at a lower rate now than than owner/occupant rates of last year. Has it ever been a better time to grab your piece of paradise?!

    Reply
  6. Jerry Lawson
    Jerry Lawson says:

    excellent article as always bad news seems to sell better so, what do we get.

    I am quite sure we have lived through a whole lot worse than this in the past. Just ask the folks who are 75 to 85 who may have lived through and or experienced WW II and the REAL Great Depression.

    When people live way beyond their means (as we did for years) there will come a time when reality comes into play – “IT DID”

    Reply

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