I’m not an expert in the housing market but I bet I know more than the reporters who are writing of the bursting of the housing market “bubble” today. For example:
Sales of existing US homes dropped 1.7 percent in November while the stock of unsold homes on the market climbed to a 19-year high, the National Association of Realtors said. Admitting a slowdown is now under way, the industry group said existing home sales dropped to a seasonally adjusted annual rate of 6.97 million last month, the lowest since March.
“Housing activity has peaked,” said David Lereah, chief economist for the association. But he insisted the market will not implode after years of red-hot growth. “There are no balloons popping.”
Inventories of unsold homes increased 1.2 percent to 2.9 million, the most since April 1986.
What is NOT said in the story is what percent of all homes are for sale now vs 1986. Sure we have more homes for sale now but we also have more homes! Raw numbers of homes are meaningless over a 20 year period.
More importantly, nowhere in this this story to they mention the effect of Hurricane Katrina. For starters, the numbers are inflated because about half of New Orleans is for sale. (And I’m not exaggerating that much.) Drive down even the good streets and you will see 3 or 4 signs.
But even that is not as dire as it looks. Many of those people are not trying to sell their homes, they are fishing.
Mythical stories of $150,000 homes selling for $300,000 because they did not flood has people all over town hammering in For Sale signs. I know a guy who would not have asked over 200K for his house 6 months ago and he is asking 250K right now. (I’ve considered it just to see what happens.) Truth is, in 6 months when the realtors’ listings expire, so will these peoples’ dream of hitting the post Katrina housing lotto. [Don’t get me wrong, there are tons of people really selling, just not every sign you see.]
To be sure New Orleans does not account for all 2.9 million homes on the market but I’m sure it accounts for a fair share. I spoke to a realtor a few weeks ago who said listings are at an all time high and sales at an all time low. Considering New Orleans is (was) about the 40th largest market in the US, I’m sure that skews the numbers.
But the effects of Katrina go far beyond New Orleans. As illustrated by this consumer confidence graph:
That big hole in the graph is what happened when Louisiana oil refineries were shut down after Katrina and gas went to almost 4 bucks a gallon.
With consumer confidence numbers like that, is it any wonder that people stopped buying houses for a month or two?
And while I’m here, I can debunk the stories you see about consumer confidence being down from August levels. There was an artificial dip. What is more impressive is how fast they recovered.
I’m not saying that real estate is or isn’t booming. I am saying that you won’t get an accurate picture from reading the dire stories I’ve read today.