So many of us giggled nervously as we thankfully avoided the end of the world a couple of weeks ago. But judging by the continued “end of the world” type coverage the Case-Shiller housing study got this week, maybe we are nearing the end.
Yes. I am joking, but I am amazed at the attention this report gets. It covers 20 markets, yes only 20, and that is just one of its many flaws. Yet many consider it “the be-all-and-end-all” economic indicator that defines our entire national housing picture. As we know, all real estate is local, and it is unfortunate that the reporting on a 20-city “national” index can have such a jarring impact on otherwise rational people.
Look at some of the headlines the other day:
“Home prices at lowest point since 2006 bust”
“Home values continue downward churn”
“No relief in sight’ for falling home prices”
And even in paradise – Maui- the front page headline in the paper screamed “Crash Spreads.” And Maui isn’t one of the 20 markets. In fact the nearest market covered is San Diego, a mere 2500 miles away!
Shawn Daly, an agent with Coldwell Banker Residential Brokerage in Evanston, Illinois, had to calm down two skittish buyers this week.
One, who is currently working in Iraq, had initially placed on offer of $450,000 on a lakefront Chicago condo. The sellers countered with a price of $525,000. But after seeing Case-Shiller inspired headlines on the web, Shawn’s client emailed him to ask that he lower his offering price by $50,000. Shawn explained that the sellers did not agree with his first offer so if he went lower he wouldn’t get the home. The buyer calmed down and agreed.
Shawn correctly pointed that the Case-Shiller Home Price Indices are meaningless to individual buyers who are looking at specific houses, on specific streets, in specific neighborhoods.
Then yesterday, Shawn met another client for a tour of potential homes. They hardly said hello without telling Shawn they were more nervous than ever after seeing the report on the news.
You have a right to be nervous, but I can’t say this enough. Now is the smartest time in my 36 years in real estate to buy a home if you have the lifestyle reason, financial stability and viability to do so.
And it’s all about “Triple I…P”. Inventory, Interest rates, Incentives and Pricing. Start with inventory, because most communities have seen a rise in the amount of homes on the market, you have more choices. Interest rates for mortgages remain at near-historic lows and have actually trended down over the last 7 weeks, with Freddie Mac reporting 30-year fixed rates now averaging 4.55%. Incentives are the tax advantages to home ownership. And of course, there are prices. Prices are down from mid-decade highs, but in many, many markets are showing stability, slight declines or even increases. Home affordability remains near record levels and the price-to-value proposition in most markets is extremely compelling.
If you are interested in buying a home, you owe it to yourself to contact a real estate agent in the community you are interested in. Look at homes, do a rent vs. buy analysis, explore what is available in your price range.
Don’t just take my word for it. Do your homework.
You might just be surprised that the end of the world isn’t here yet … at least until next month’s report.
updated 4:55 pm
Thanks for all the comments. I wish I could have gotten more into the Case-Shiller debate, but clearly I can’t get “too much into the weeds.” But here is some other food for thought – consumer sentiment is improving. Consumer spending has been up 10 months in a row. Also, most economists are predicting a 2.8% GDP growth in Q2 up from 1.8% in Q1, certainly not great but at least going up. Obviously the signs for the economy are showing improvement. Home ownership is an investment in your lifestyle and not for everyone. I am a huge proponent of the longterm benefits of owning.
Well said!
Kudos to Jim.
Good for you, Jim. I get so disgusted with all the negative media. Our company is up 42% in units and 24% in GCI
Jan-April 2011. May was also very brisk. But if the slanted news doesn't stop, this could all come to a screeching halt. Best regards, Cathy Kavounas, Allentown, PA
Thanks Jim! I am selling in northeast Wisconsin. The market is not dead here, but we are still fighting negativity.
Finally, a rational voice! Thanks for the report and for helping counter so much negativity!
Ashley Soto
Transforming Decor Home Staging & Redesign http://www.transformingdecor.com
Cool heads always prevail!
Jim, as always you are on your game and not only keep our heads up but provide valuable and truthful antidotes to the doomsayers cry "The Sky is Falling". Thanks!
Bob Rich
Broker/Owner
Coldwell Banker James C.Otton Real Estate
I can't beleve how many people have their heads in the sand. Sure not all markets are the same. And, sure it's vital we stay positive! And, sure prices are great, and interest rates are low. But, economically, what do you folks think these are indicators of???? Don't let the miopia of your Real Estate business blind you to what's going on in the economy! Be proactive! You can be looking up at what you beleve in blue sky and walk off the cilff! Contact your Congressman and Senators! MAKE them legislate sanity back into the government!
Brad Anderson
Coldwell Banker BSSP
Vancouver, Wa
What I find is often missed in this discussion is that C/S, and most other analysts, are using the same methodology that they used to describe the the never-ending appreciation in real estate for the last 15-20 years. By the time the analysis is published the data is 3-4 months old and it is the same methodology that the lenders were using to justify the Wall Street investment in the last decade. Using the same old Metropolitan Statistical Areas (MSA) may be helpful for some areas but completely ignores the local knowledge that is the true value statement of our industry.
Thank You Jim!
At least Case-Scheller index provides some statistics rather than subjective counter arguments. I was in science before real estate and you can’t prove a point with some numbers. I tired if that relentless “it’s a great time to buy a home” mantra as prices have continued to fall. You need to qualify that statement. Yes it’s a good time to buy but As I tell all my clients be prepared to stay in the home for at least 6 years because nobody knows what the market will do next.
Read Seattle Bubble.com for some open debate on the market and actual statistics. I just had my best month ever but I’m also an optimistic realist.
Thanks
Conor
Thanks for the great article. It never ceases to amaze me how irrational buyers and sellers can be. I must have said a hundred times "your home is worth what someone is willing to pay for it!" I point out pockets where prices are much higher than the average.
"Its a Buyer's Market;" There are BUYERS and there IS a Market.
Be wise. Bid fairly. If you want a home, don't try to get it at the lowest price
you can imagine; offer close to the price, or the price, you are willing to pay. I've had
buyers that have put offers on two properties, they really wanted them but
bid so low; sellers countered, buyers countered back;
someone else put a better offer on the table and got the property, both times. Be Wise.
Well stated. Thank you, Jim.
Honest assessment of really matters! What you represent is the calm we need in the midst of the confusing-facts-storm. Thank you for giving a "voice" to common sense in the media.
Cindy Yoder, Broker
Coldwell Banker, Vinson Chase, Realtor
Modesto, CA
Thanks for your report Jim. Its unfortunate that we are hearing so much about buyers should not buy, but should rent. However no one describes the whole picture about how much money goes out the door for rents, and how much tax
advantages of home ownership are buyers losing because they don't own a home. Tax advantages losses should be calculated into the rent vs buy scene!
Monna Lou Henninger, Coldwell Banker Easton, PA office
Yougot that straight!
Thanks for the comments. I wish I could have gotten more into the Case-Schiller debate, but clearly I can't get "too much into the weeds." But here is some other food for thought – consumer sentiment is improving. Consumer spending has been up 10 months in a row. Also, most economists are predicting a 2.8% GDP growth in Q2 up from 1.8% in Q1, certainly not great but at least going up. Obviously the signs for the economy are showing improvement. And Conor, you are right. Home ownership is an investment in your lifestyle and not for everyone. I am a huge proponent of the longterm benefits of owning. Jim
Just closed out the best month in our history in Northeast Louisiana. I tell everyone if you plan on fishing in Louisiana you don't check the weather in California. The only thing that negatively effects the economy in our region is if the LSU tigers or my beloved OU Sooners have a losing season. Don't quit yet Jim!!
Darryl Beasley, CB Group One Realty
I often wonder why they don't ask Realtors about Real estate? These are the same "sky is falling" people who believe whole heartedly in Zillow values and that it's the bible of real estate values. Thanks for the the perfect synopsis of the media feeding fear! I personally get a little chuckle, our markets the best it's been in 4 years, but if they want to let fear run their lives, everyone needs a good renter!
Excellent post. Even here in Boston, many markets are very strong.
Richard D. Vetstein
Every market is local. I have just closed 5 escrows in the Sonoma Valley over the last month and half ranging from $455,000 to $2,200,000. Obviously there are savvy buyers out there that can see through the media hysteria. Yes, the economy is still healing, but the long term picture is still bright. Those that don't take advantage now, will be Monday morning quarterbacks in the future.
Amen! Great blog post!!!!
The number of residential homes going under contract this May in Northwest Arkansas was up 55% over
last May's number, however, we aren't on the "Case-Scheller" list, so that good news doesn't count.
Thank God I don’t listen to such articles. I for one bought an investment property innMarch and could not be happier. I an looking for two more. The people who understand cycles and real estate are seizing the opportunities!!!! Could not be a better time to buy!!!!
It is not about being irrational…it is about being cautious…I saw so many real estate agents continually say back in 2004-2005 that it was a great time to buy and what a great deal they were getting…and then boom…houses wete worth half what they paid…this article wants to ignore some hard facts in favor of fuzzy feelings..It’s only a great
Jim, didn't know Case-Shiller was only 20 markets, and thanks for being the voice of reason here because what you say is true.
The news is the news and Case Schiller fills a niche. Good thing is it provides even more reason to talk about real estate and home buying. How we deal with the renewed interest and concerns is the key. This blog is an excellent example of the way it should be done.
[…] Jim Gillespie, chief executive officer of Coldwell Banker Real Estate LLC, gives us some good insight in his post “Hey Case-Shiller It’s Not the End of the Real Estate World” […]
Great post! It is so important to keep driving home that real estate is local! http://www.wesellrichmond.com
Well said and so very true! Our Arizona market continues to improve with multiple offers on many homes and we were ground zero for the bubble. If the house is in good condition and priced well it's in escrow in under 30 days. Does that sound like a down market to you? How often do you see widely varied markets within the same city let alone an entire country. A 20 market sampling gives an inaccurate view of the actual overall market.
The numbers come from so many sources in so many ways 2 people can be in the same debate but debating 2 different issues. The other day Crain's Chicago posted that a certain Chicago zip code saw the biggest uptick in home prices. They stated it was single family housing but really did not emphasize it. That zip is primarily a condo market with very little single family housing stock. It neglected to say that they condo values in that zip code are greatly depressed. I became aware of the article by a listing agent representing a condo listed in that zip code that one of my client's is interested in. They asked me to pass it along to my client who is weary about the where the condo is priced at to communicate the market is on the rise.
Even the agents are looking at the headlines and not reading the details.
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Well done Jim. It’s very similar to any other negative situation happening in our world. Negativity sells. Hype sells. Sensationalism sells….newspapers and magazines. I prefer to focus on the positives of the real estate market because they will remain true while the other stuff fades, like when a better story comes along. When you have an obligation to address a negative, discuss it, without painting it as something it isn’t. Discuss the negative situation in relation to the transaction, not the national real estate market. Comparing one transaction to the national market would be like saying because the stock market is doing badly, you’ll never find a good company stock to buy. That’s crazy! I feel my job, now more than ever, is to bring things back into perspective for people who are on information overload. http://www.MoberlyMoRealEstate.com
I agree. There is so much hype out there these days, and the media jumps on and reports whatever sensational headline they can come up with that day. I tend to get my real estate news from blogs like this. Movoto also has a cool site, which covers real estate news in depth.Here in California, depending on what you read, things are either better, worse or the same. Perhaps no one knows.Sami, Claremont, CA