Mark Twain coined the phrase,”There are three kinds of lies: Lies, damned lies and statistics.” It is a great phrase that helps describe the persuasive power of numbers in weak arguments. It is usually used to doubt statistics in order to disprove an opponent’s point. With real estate, there are a lot of numbers, graphs amd statistics that can be tweaked in order for the author to make his point. One can be skeptical of these and try to see if there is more (or less) truth to them.
There seems to be an overdose in the media on how the housing/real estate industry is finally going to pull us out of the financial downturn that we have been in for the last five years. The national and state real estate numbers that came in last week were all optimistic, as were the home builders’ and consumer confidence readings. These figures don’t lie, but some of the stats need to be re-examined to understand what is going on with the local market.
Across the board (nationally, statewide and locally), the number of sales in July and August are an improvement over the previous months and when compared to the same months in 2011. Case-Shiller is reporting that 15 of the 20 metropolitan areas it tracks had positive numbers this month. The news on home prices in itsr report confirms recent good news about housing. Single-family housing starts are well ahead of last year’s pace, existing home sales are up, the inventory of homes for sale is down and foreclosure activity is slowing. In other stats, sales were up 8 percent nationally, 25 percent statewide and 16 percent in Newburyport. As for prices, they were up 9 percent nationally, but flat statewide and down 5 percent in Newburyport.
The most telling stat that I have seen is that September is the 14th straight month of year-over-year sales increases. When analyzing this stat, one has to be reminded how bad the real estate market (hence the economy) was. Actually, it was terrible. So when we see these numbers continuously going up, don’t be too excited as they started at a real low point; things couldn’t get worse. And luckily in Essex Coun, we did not see the real estate prices fall as bad as the rest of the country, so the rise back should be easier. Even though we have experienced a 6 percent drop in prices this year, we are above 2003 prices. And at the rate we are going presently, we will exceed the last five years in number of transactions.
The housing market is strengthening even with difficult mortgage-qualifying conditions. Just as easily it was to get a mortgage prior to the real estate collapse, it is as difficult to get a mortgage today. Lenders are being more cautious. Some buyers are being involuntarily sidelined and are frustrated with mortgage availability. The National Association of Realtors is claiming that if most of the financially qualified buyers could obtain financing, home sales would be about 10 to 15 percent stronger, and the related economic activity would create several hundred thousand jobs over the period of a year. So, yes it seems that the housing market is going to pull the economy up by its bootstraps.
I predict that with the more balanced market conditions and great motgage rates, prices will start to rise. Locally, we should see a 5 percent increase by next spring and another 3 percent by the summer. But this will still be 8 percent below the lofty prices of ‘06 and ‘07. But sellers will need to be careful and not get ahead of themselves as interest rates will rise and that will affect the purchasing power of the buyers. As for transaction numbers, we will set records. So as Twain, the humorist, would say,”Get the facts first, then you can sort them as you please.”
Bill Barrows is a Newburyport real estate agent.