It's Impossible to Judge Housing Now


Over the weekend, after Friday's report on sales of newly constructed homes, I found myself in a bit of a "debate" with California-based real estate analyst Mark Hanson, for whom I have great respect.

Hanson suggested I was a little too bullish on the news. Now don't get me wrong, not a day goes by in my work that someone (read A LOT of folks) doesn't criticize me for being too bullish, and someone else doesn't criticize me for being too bearish on whatever happens to be the news du jour.

But Hanson got me to thinking about how we judge today's housing market in general.

Friday's report from the U.S. Dept. of Commerce has sales of new homes up nearly 27 percent in March from the previous month. After Thursday's report from the Realtors that existing home sales rose nearly 7% month to month, the news wires were buzzing that housing was finally bouncing off the bottom. I was a bit skeptical in my reporting, only because there is so much government stimulus in the market right now, holding off foreclosures and spiking sales with the home buyer tax credit.

But no question, big jumps up are better than what we've been seeing for the last three years.

"What, you had to do your one bullish story for the quarter for the bosses?" Hanson wrote to me.

I argued that I am neither bullish nor bearish, but do my best to report the numbers with all the influences weighing on said numbers. But then he made a very valid point:

"You can't compare YoY sales and call them great when conditions YoY are 180 degrees different. It is not a fair apples and apples. Also you can't look at seasonally adjusted numbers."

Even the folks at S&P/Case-Shiller admitted that last week (see post 4/22). The numbers are so skewed because of the unique and historic nature of this housing crash, and the government's response to it, that it's very hard to do the usual annual comparisons in order to get any sense of recovery.

More from Hanson on new home sales:

"You are right, there were more sales this March than last March. 38k vs 31k last year during the worst despair ever, and all the gains this year came from one region, the South. But after spending as much as we have, knowing the stimulus is gone, rates won't go lower, and Foreclosures are hitting at a good clip, it sure would have been nice to see that number at 50k or 60k. Below is March sales for the past 30 years. It's up, but a "recovery"? Need more evidence."


Then how do we judge today's housing market?

I still go back to my original premise of location. Yes, this is the broadest and deepest housing recession we've seen since the Great Depression, and possibly even broader and deeper. Government jumped head over heels into a massive bailout, and not only that, it took over the mortgage market entirely. Seasonal adjustments no longer make sense when tax credits are not seasonal, and year over year makes no sense when we're still hovering near historic lows. Is a 27 percent jump really so fantastic when it's 27 percent of next to nothing comparatively?

So I go back to my neighborhood in DC, which for the past year has had very few properties for sale and a very slow sales rate.

This month I've seen a big jump up in listings. I saw one house, priced very conservatively, go very quickly. I walked through another house yesterday that was, in my mind, overpriced, and it's been sitting there for over a month. But I don't live in the boom/bust states. My neighbors ask me cautiously, what do I think?

And it is their caution, in my mind, that is most telling.

Questions? Comments?