Prices have been falling for a long time. My own experience is that my house would be very competitively priced at $830K in October 2005. This is not a overvalued listing, but a realistic price based on the last comp sale just 3 months prior. My realtor had sold the comp, and knew how it compared to mine. Important point is it was a realistic pricing. I had lots of traffic, so I was priced well. One buyer walked when I said I would not consider offers under $780K. WE had range pricing $780 – 830K. I had 2 offers at 780. Took the 2nd offer. So I took a 5% drop. Meanwhile, median was still going up.
Look at the bubble blogger links, for more stories of prices dropping. Most sellers are getting 2005 or 2004 prices. Those who bought in 2004 or 2005 and are selling, are bringing money to closing.
Yet, today’s U-T shows SFR is up 2% from last year.
First, this is a distortion of the inside story. Each individual home is down to 2004 or 2005 prices, but the rich people are still buying, skewing the distribution of homes sold. So while it is mathematically correct that the median is rising it DOES not mean that each house is worth 2% more than last year.
Second, the median was rising for the summer of 2005 and then dropped. It has been dropping since last fall, but the median is reported as year-over-year. So you don’t see the median reported as falling until it has been negative for ONE year.
This is so different from the way other economic data is reported. CPI, unemployment, and many other indicators, are reported month-to-month. I think a month-month indicator, along with yearly, is useful.
A more useful gauge of the housing prices is the data that Rich uses, the OFHEO data. It gives the price of the SAME house sold since the database started several decades ago. It tracks the price of the SAME house, not the change in the distribution of homes sold.
The OFHEO will show declining prices, but it is published many months late. It takes the government so long to collect the data.
Leading indicators are months supply, which incorporates inventory plus demand, and second is HAI.
By 12-18 months lagging, I mean that it will be the end of 2006 or middle of 2007 before the median for SFR homes is down 5%, the amount that my home was down in December 2005. So while home prices were down by 5% last winter, the public won’t be informed of this fact until 18 months later.
The DataQuick and NAR people are not interested in giving us accurate data, only in promoting real estate. We have all been misled. The only reason I know so much is because I have too much time on my hands and some good and smart friends who are realtors and figured this stuff out.
