Yun Says Real Estate Market Conditions Just Temporary
I just finished reading the most recent Existing Home Sales Report by Dr. Yun (chief spin-master for the National Association Of REALTORS®) and was not surprised to see the normal bending and twisting of the housing data to form a “why things are improving” article on real estate. But I was surprised at his conclusion that the problems in the real estate market are temporary.
Just to make sure that my less than stellar grasp of the English language was not failing me, I quickly Googled the term “temporary” to make sure I understood what it really meant:
temporary [?t?mp?r?r? ?t?mpr?r?] adj
- not permanent
- lasting only a short time
I can happily report that temporary means what I thought it means … “lasting only a short time.” If one considers that the age of our planet is about 4.6 billion years, and the humans have walked the earth for about 2 millions years, and the age of the United States is 235 years, then I would agree that these housing market woes are indeed temporary. But if you want to sell a home in the next 5 years, then you will not think the housing market decline is just temporary.
Yun put the brunt of the blame on temporary conditions caused by increased gasoline prices and widespread severe weather, and he went on to claim that the pace of sales in the second half of this year will be stronger than the first half. Of course, he’s hedging his bets by knowing the post-Homebuyer Tax Credit period began in the second half of last year, and the corresponding 2nd half of this year will likely see a rebound by first time homebuyers.
But I am not so sure. And I do not have a trade association that I am beholden to, so I would rather just examine the real estate market conditions and report what I see. And what I see is not a temporary condition.
Home Sellers Are More Than Half Of Our Buyer Pool
Yes gasoline prices are too high, and yes severe weather has slowed sales in many regions of the country (first time for that, right?), but the real problem in the housing market is that more than 1/2 of our normal pool of homebuyers is unable to make a purchase. If gasoline dropped to $1 a gallon, we would still have homeowners who owe significantly more money on their homes than what they are worth.
If everybody had the glorious sunshine that we enjoy in Tallahassee year-long, we would still have foreclosures, short sales, and reo properties dragging down home values. Smart homebuyers know the state of the market, and they are proceeding cautiously. And again, this is not a temporary problem.
Pending Home Sales Are Low
When we look at new contracts in the Tallahassee MLS (pending home sales), we see that they are bumping along at the lowest level since we began plotting them in 2008.
Currently, the number of pending home sales in Tallahassee is down 15% from the same time last year, and that means we can expect our year over year home sales to decline by roughly the same amount over the next two months. Not exactly a great start for a stronger 2nd half of the year!
Now you might be tempted to argue that Yun was reporting on the entire US housing market, and my pending home sales graph is merely for the Tallahassee real estate market, and you would be correct. The US Pending home sales report will be published on Monday, and I look forward to seeing if it is showing any signs of improvement over one year ago.
Based upon the most recent pending home sales figures (real estate graph above), I’m wondering what Dr. Yun is seeing. The graph shows a declining trend in new contracts for the US, and the current level is below what was reported one year ago. Of course, the HomeBuyer Tax Credit ended in April of last year, so he might be assuming the rebound will be starting with May of this year. Time will tell, and Monday’s US Pending Home Sales Report will be our first clue.