Ever heard the song "One Note Samba?"
The melody cleverly used repetition on one single note to create a memorable melodic motif. The song was a hit back in the 60's.
But you are hearing a version of it every time you listen to most news telecasts. Most of the stats we hear are true but usually the story is incomplete.
The examples are endless. Here is one: today's headline regarding the Existing Home Sales figure. The surface interpretation is "more trouble ahead for housing."
Not so fast.
Look below the attention-grabbing headlines and there is a story with substance. But the real story points to housing market fundamentals coming back into balance. Not as fast as we all would like, but the statistic is not one-dimensional.
As home values edge lower, value buyers are responding. True, the number of homes sold fell to the lowest levels in 12 years, but it is also important to remember that the number of homes available to buy fell, too.
Reasons why...
- Banks have slowed foreclosures
- Not as many job related relocations due to current economic conditions
- New home construction is slim
The result: The nation's housing supply is as low as its been in more than a year.
Projecting the current rate of sales activity, the national housing supply would be 100% sold in 9.6 months -- that's a two month improvement from the high point that was set June 2008.
Can we expect demand for homes to rise? Considering the Fed's commitment to low mortgage rates, Fannie's moves to open it's resources to investors, tax credits to first-time buyers from the Stimulus Package, the impact of the huge mortgage plan yet to be implemented, as well as several years of qualified buyers on the sidelines, I'd say there is a reasonable expectation that we'll see demand going up!
My point: the headlines are not entirely wrong, but they tend to focus only on a one-sided...should I say lopsided...perception.
It is wise to not be on "auto-pilot" when you hear these headlines. They typically don't tell the full story. Falling supply plus rising demand are two primary conditions that, over time, contribute to housing stabilization and recovery.
[The Kathy O’Neal Team serves home buyers and sellers in Northern Virginia, with special focus on Chantilly, Centreville, and the communities of the Western Fairfax region.]
(Image courtesy: Wall Street Journal Online)
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