… or “Why I think Steve is being silly.” Do not think for a minute that this post is not going to get me in some really deep domestic doo-doo.
First off, it is not his conclusion I disagree with — of course there is hope for the future — but it is the argument. And in all fairness, it is only parts of his argument.
My partner likes to point to the increase in number of homes sold lately to make his case that the market is turning, and he likes to point to these sales numbers a lot. “I am going to the store. Do you need anything? By the way, sales are up!” or “We need to send Grandma a birthday card. How ’bout those November sales?” This has been a huge point of contention at Chez Berg, where we spend our leisure hours as any healthy family does — arguing about market data.
Here is where we generally agree. We are not through the down-trending in prices, but the rate of decline this next year will be gentler. Favorable interest rates and latent buyer demand will both serve to bolster the market as we move forward, as will measures being taken at the Federal level to assist homeowners at risk and to stimulate lending. A lot of the bad news is behind us and while we are far from a reversal, we are moving in that direction.
Where I disagree is with what the Fall sales numbers are telling us.
There are a whole bunch of things you can count on in life. Thanksgiving always falls on a Thursday, most resolutions are made and broken in January, people spend more money during the holidays, and Steve’s hard drive will crash once a year. Home buying activity is just as predictable. The minute any of these things stop happening as expected, we have outside influences at play. The results may be anomalies, but they don’t necessarily signal a trend.
Let’s look at sales numbers. This chart shows the number of homes sold each month in San Diego County back to 2004 (courtesy of the Sandicor MLS, all property types).
Volumes may change, but the trend lines are the same. Spring activity is healthier, and March, June and August see spikes in recorded sales. Sales begin tapering off in September — always. Now, here is what 2008 has looked like so far, and I have included the 2007 trend line, since we all like to talk about how the number of sales is up over last year:
Yes, sales are up, both the annual sales and the monthly sales year-over-year. But the trend line is whacked out. Stuff is going on, external stuff, influencing activity. The problem is that a lot of the externals are temporary, and we can’t begin to predict what new variables are going to be thrown in the mix as we move forward, so predicting the future based on immediate past performance is a turkey shoot at best. All the sales numbers tell us right now is that we have volatility and uncertainty. Until the trends return to “normal,” and I am not talking about numbers of sales or sales prices, but the trend line itself, market stability will be somewhere off in the future, and how far off that future is will be any one’s guess.
Somewhat off topic, but because I know you are dying to see the price trends, here you go. This takes us from January of 2004 to today. It would have been far more interesting had I gone back to the days of our last market “correction” (mid-1990’s), but I ran out of steam.
Now I will be heading off to the corner as a preemptive strike. Bad wife.