Spring Real Estate Lessons; Too Early for Conclusions
As our week-long Spring Realty Checkdraws to a close here in Chicago, I'm struggling to come up with a fundamental conclusion.
The trouble of course is that the Spring season isn't over, and the housing and mortgage markets are facing so many unknowns that any conclusion would be ridiculous.
The one thing I can surmise, after talking to real estate industry types from Boston to Seattle and in between, is that housing is not roaring back right now, and may in fact be double-dipping,
We've already seen home prices take a turn for the worse again, but sales seemed to be picking up in January. Unfortunately that may have been short-lived. While all real estate is local, the sales numbers are not encouraging. RE/MAX just reported February home sales down 3 percent annually.
"This is the first time in four months that the year-to-year sales difference was not better than the previous month," according to the report. Sales were up month to month, but not by much.
New construction isn't faring much better. The home builders reported a slight tick up in sentiment this week, but that was all based on future expectations, not current sales and traffic.
"Although we hear of some amazing traffic and sales numbers, most builders aren’t seeing them," notes John Burns of John Burns Real Estate Consulting. "Our contacts report improved traffic, but sales are spottier from week to week. Qualification problems remain the most frequent headache, but competition from foreclosures is still a bigger."
I'm beginning to wonder if the nation isn't feeling some foreclosure ennui. It's the same thing that happens often with other big long-running stories. Because it's dragging on, it doesn't seem like such a big deal. I know I was really struck by the Chicago street I visited, where 7 homes on one block were boarded up. I spoke to a neighbor there who looks out on these homes every day from her front porch. I think some of us have lost sight of that.
The other problem is that all the foreclosure paperwork issues are skewing the numbers, so we can't really grasp how the nation is truly faring. Numbers right now mean nothing, because they can't show you that Chicago street or give you an idea of how many streets there are like that across the nation.
I was also struck today by the results of the CNBC All America Economic Survey.
Despite nearly one quarter of respondents saying they expect their home prices to drop further, three quarters said they still believe home ownership is a big part of the American dream. That's a big positive, despite the fact that so many more Americans are rushing to rent rather than buy.
And on the rental front, I was also struck this week by a survey from Deutsche Bank showing that renting a home is now more expensive than paying a mortgage. That's the first time in 20 years that this nation has seen that, and yet the rental market continues to surge, as I saw in Boston.
I learned a lot about the market in preparing for this series, but as Socrates said, "The only true wisdom is knowing you know nothing." We can throw out a whole lot of numbers, analyze trends, add up losses and gauge consumer behavior, but we will only know the housing market has truly recovered after the housing market truly recovers.
One question in the CNBC survey asked how much of an indication various economic factors are that things are getting better overall.
Eight percent answered that home prices increasing would be the best indication, but more than half said it would be either a good or somewhat of an indication. The trouble is that we need potential buyers to think that the economy is improving in order for them to start buying, not the other way around. I'll repeat it again: The housing recovery is all about confidence. Consumers need to feel good about the nation's and their own finances before they make such a huge purchase.
This is not to say that there is not plenty of money to be made in real estate right now, as many of the stories I reported this week prove. As for overall, organic recovery in housing, I'm not sure we're there yet.