Tuesday, September 7, 2010

Conflicting Housing Price News

Funny thing about housing news, it changes radically from month to month. One month you hear that the average price has dropped X%, the next month, it is up Y%. Then you hear that new home sales have dropped dramatically.
What to believe?
Let’s look at some of the statistics behind the numbers. When congress enacted the First Time Home Buyers Tax credit, it created a market of guess what, First Time Homebuyers! These people were looking for inexpensive, affordable homes that would fit into their budget. These homes generally were at the entry level of housing prices, so the average price of a home was driven down. This does not mean that other houses were not selling, but that the unit sales were skewed by the tax credit.
When the credit ended, and the unit sales in that entry level price range fell back, the average price of a home went up.
As to new home sales dropping, well, building permits for the past 24 months have fallen significantly, and banks have been more reluctant to extend loans to builders, so with fewer homes being built, it stands to reason that fewer are being sold. This does not address demand, but supply.
My point here is that if we respond to information without a frame of reference to it, we become part of the panic that just feeds the problem. We are in difficult times, but not impossible times. The demand for housing still exists, though slower than several years ago. Sellers are taking a more realistic view of the value of their property and prices are not as speculative.
Companies continue to move to Charlotte and the long term future looks good here. There will be bumps along the way, but don’t succumb to panic.

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