Are home prices falling?
Sometimes I think headline writers are deliberately trying to convey a false impression.
Take this will home price appreciation fall? article in the Daily Dose. Ok be honest, if you read this headline quickly, would you think home prices were going up or falling?
Well, of course, when you stopped to think, you would understand – appreciate? – that prices are still going up, but the word “fall” in the headline conveys the opposite impression.
The article continues: “While still high, it still means home prices appreciated at a rate in May that was 30 basis points lower than April.” Whoa – 30 basic points lower – catastrophe…er…what does that mean?
According to the National Association of Realtors (NAR) the median SFH price in the US in June was $247,700. The dollar amount of a 30 basis point – 0.30% – decline in the rate of appreciation (I think that phrase was written by the EU in Brussels) – is $741. That means that house prices went up in June by $741 less than they would have done had they continued the rate of increase in May. Right.
To put that into perspective, in June in 743 sales in Essex County, the sales price on average was 2.9% different from the original list price: 53% sold below list price, 14% at list price and 33% above list price, but the average difference was 2.9% – or nearly 10 times the slower growth rate in the NAR report.
Sometimes a Realtor can advise a seller on a very specific likely sales price – in identical condo units in a building, for example – but most of the time a Realtor will suggest a range in which he or she thinks the house is likely to sell and also suggest list price. Never will these numbers have the precision implied by the NAR report.
What really matters is that, according to the NAR, prices are still going up. As a buyer, if you wait you are likely to pay more. As a seller, in general terms, you want to be selling into a rising market, and be aware that the house you buy is also likely to be going up in price.
While “all real estate is local” it is also important to be aware of national trends. The economy is growing at a modest rate, which I have argued for about a year means that mortgage rates are not going up – in fact the 30 mortgage rate is about 1/2% lower than it was a year ago, job growth is strong, and the Presidential election in November is looking less likely to be a shock to the ecosystem than it did quite recently.
Statistics are “supposed to make something easier to understand but when used in a misleading fashion can trick the casual observer into believing something other than what the data shows.”
The goal of Oliver Reports is to inform and entertain. I provide detailed statistics and explain when they are – or are not – relevant, or what they mean. One simple piece of advice: whenever anybody quotes you a statistic, ask them: “what does this mean for me?”
If you are considering selling your home please contact me on 617.834.8205 or Andrew.Oliver@SothebysRealty.com for a free market analysis and explanation of the outstanding marketing program I offer.
If you are looking to buy, I will contact you immediately when a house that meets your needs is available. In this market you need to have somebody looking after your interests.
Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated