Once a month a local real estate broker passes out monthly updates of our local Connecticut housing market at our commuter train station. He’s a nice affable guy and I get to hear him explain the market to people as we wait in the warm station. He said this to me after I took a look at his handout this morning,
“The statistics aren’t too shabby, eh?”
And I smiled and responded, “that’s the power of record low mortgage rates.” to which he gave me the “thumb’s up” gesture.
And he’s right, his MLS statistics show a very much improved housing market from a few years ago and nearly all of the improvement has been mortgage rate related.
His view of housing is not unlike most public economic prognosticators from Wall Street, NAR, NAHB and real estate brokerage firms, consumers and general in-the-media-all-the-time types.
However few, if any, prognosticators understand why or seem interested in understanding whether it is sustainable (aka forecasting a trend). Once a metric shows promise, it will rise forever, or something like that.
Here’s my town recap for November being presented as a report (with a wildly low 15 sale data set). All the percentages reflect November 2012 over November 2011:
- New Listings -40%
- Pending Sales +36.4%
- Homes sold +15.4%
- DOM +53%
- Average Sales Price +29.4%
- Average Dollar Volume +49.3%
Despite the low data set, the results are remarkably consistent with national trends. Now look at why these metrics actually changed:
- New Listings -40% [tight credit pressing inventory down because sellers can't buy]
- Pending Sales +36.4% [record low (and continuing to fall) mortgage rates + high rents]
- Homes sold +15.4% [behind pendings because pace of sales accelerating as rates fall]
- DOM +53% [older stagnant inventory is getting sold off from lack of supply]
- Average Sales Price +29.4% [more high end sales are moving this year]
- Average Dollar Volume +49.3% [same as above]
If you pull the plug on low rates, the housing market (literally) plunges. No one is suggesting this is the scenario that will occur but the national housing market feels incredibly fragile to me.
But why should I (or anyone else) actually care whether we understand what’s actually going on? The stats show sales and price numbers are higher than last year – “bullet dodged” – that’s all we need to know – we did the math.