Bernardsville New Jersey Property Owners: Don"t Believe Everything You Hear or Read in the Media.
Many headlines in the media right now are proclaiming the total collapse of the housing market. What makes it seem very believable is that the headlines are based on two reports from the National Association of Realtors (NAR): the Existing Home Sales Report and the Pending Home Sales Report. However, all is not what it seems.
Both reports look at two different sets of data:
- A year-over-year comparison of transactions (Y-O-Y)
- A month-over-month comparison of transactions (M-O-M)
The negative headlines you have been reading are based on the Y-O-Y statistics. If that's the data set you're working with then I agree, the numbers are horrific. But, there is a logical explanation for this.
Last year, at this time, we were headed toward the expiration of the Homebuyer Tax Credit, one of the greatest buyer tax incentives in American history. There were people rushing to get their home into contract and/or to a closing. That's why if you check the Y-O-Y stats in this blog's 2011 Home Sales in Bernardsville page or the Bernardsville Quick Peek, you'll notice we're behind last year in closings 15 to 9.
The Homebuyer Credit dragged demand forward. People who would have normally closed later in the year moved their closing up in order to take advantage of the tax credit. Comparing sales in the first four months of this year to the same time last year is not comparing similar situations. My team and I just realized our faux pax after studying the most recent reports cited above and we apologize for presenting information that although correct is not really beneficial in making a realistic comparison of the 2010 vs. 2011 Bernardsville real estate market.
A much better way to judge the market at this time is to compare month-over-month sales. Here is a graph provided by the National Association of Realtors showing the pending sales over the last twelve months.
As you can see, sales dropped dramatically after the expiration of the tax credit in April 2010. Then sales began to slowly rebuild, showed a slight and expected decline during Dec. and Jan. and are now increasing nicely as we head toward the warmer months.
Now, this news does not preclude what we've been saying about the coming release of the so-called "shadow inventory" because that, my friend, is iminent. The question is not if it will be released, it is when it will be released. Of course, the banks are not as dumb as we might like to think . . . they will probably not unload all of the existing and new REO (real estate owned) properties at once. This would simply chew off their own foot since that would undoubtedly drive housing prices through the floor and further reduce the bank's losses. But, there's no mistaking it, they will release large blocks of properties just as the buying season warms up. That is, unless the Fed decides to intervene in some way. But, frankly, I don't see that happening.
Bottom Line
The market is definately gaining momentum not falling behind. Headlines sell papers. Knowing what is truly happening in the real estate market is what's important.
Bernardsville New Jersey Property Owners: Don"t Believe Everything You Hear or Read in the Media.
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