Predicting the Future of Housing Sales - Do You Prefer the Magic 8-Ball or Google?

What is Google Trends?

Google Trends is an interesting tool.  It allows you to measure changes in the volume of searches for specific search terms to create an index.  The index value "1" represents the average volume of searches for the search term.  Google Trends allows you to break down the trends by countries or even states and allows you to track different time periods.   It also provides an index of the number of news articles where the search terms appeared to see what impact new articles had on the search terms.

Can It be Used to Predict Activity in the Housing Market?

Google Trends - Homes for Sale

Google Trends - Realtors

Google Trends - Mortgage Interest Rates

The Answer is Maybe? 

In the past 60 days or so, I have read and heard anecdotal stories of an increase in showings, buyer activity, etc. in the housing market.  So, I wanted to take a look at the Google search trends.  Using the search terms "homes for sale", "mortgage interest rates" and "realtors" as a proxies for buyers searching for new homes, there were some pretty clear trends shown by the three index charts produced by Google Trends:

• Flat or average search activity from April, 2008, through September, 2008.
• Long, steady decline in search activity from September, 2008, through mid-December, 2008.
• Sharp increase in search activity in late December, 2008, with sustained above-average search activity from January, 2009, to the present.

Based on Google Trends data, it suggests that buyer activity is increasing in the following cities:

• People searching for new homes:  Oklahoma City, Norfolk, Phoenix, Louisville, Salt Lake City, Orlando, Tampa, San Antonio, and Atlanta.
• People searching for real estate agents:  Louisville, Oklahoma City, Cincinnati, Columbus, Rochester, Dallas, Austin, Newark, San Antonio, and Charlotte.
• People searching for mortgages and mortgage rates:  Madison, Raleigh, Salt Lake City, Boston, Charlotte, Kansas City, Omaha, San Jose, Newark, and Minneapolis.

So Google Trends has made me curious.  Our traffic is distinctly different then the Google Trend lines for the indexes for the three search terms.  However, our sales activity was exactly as predicted by Google Trends.  

If you sell homes, stage homes, inspect homes, or make loans in any of the markets above, I would love it if you posted a comment indicating whether your experience over the past 12 months is consistent with the Google Trend indexes or not.

• Link to White Paper:  Google Research Blog.
• Link to News Article:  The Economist.
• Random Note:  Google White Paper indicates that the Real Estate Agency Index shows a positive correlation to home sales and that the Rental Listings and Referrals Index shows a negative correlation to home sales.  It claims that models including Google search data are 12% more accurate.