Continuing to Look for Underlying Strength in Housing Sales

One of the many ‘trends’ that researches such as those at the Texas A & M Real Estate Center are always on the lookout for is what’s often referred to as an “inflection point”  in their data.

When a trend is either moving up or down, it’s easy to just say “next month will, or should be a continuation of the trend.” An inflection point occurs when a previous trend clearly has ended and a new one has begun.

We are now looking at a possible inflection point in single-family home sales in the overall, national sales numbers. The next ‘data point’ in these numbers will become public on August 29th, when the National Association of Realtors (NAR) releases its Pending Home Sales numbers for the month of July.

We don’t want to pay too much attention to the change from one month to the next, though.  Home sales are highly ‘seasonal’ in nature.   Hence the phrase we hear quite often in the news, “sales increased (or decreased) on a seasonally adjusted basis..”  For example, just because March sales are greater than February doesn’t imply that housing demand is picking up.  It could just reflect the fact that, historically, more homes are almost always sold in March than in February.

Looking at the year-over-year (YOY) comparisons, though we may have seen the inflection point arrive in the May Pending Home Sales report. Take a look at the sales numbers below so far for 2011:

Report Release Date:      For the Month of:      Change From Same Month a Year Ago

Jan 27th, 2011                 December, 2010         Down 4.2% from December, 2009

Feb 28th, 2011                 January, 2011             Down 1.5% from January, 2010
 
Mar 28th, 2011                 February, 2011            Down 8.2% from February, 2010

Apr 28th, 2011                  March, 2011                Down 11.4% from March, 2010

May 27th, 2011                 April, 2011                   Down 26.5% from April, 2010

June 29th, 2011                May, 2011                   UP 13.4% from May, 2010

Does the sales performance in May indicate the cyclical bottom in demand? If it does, we should see positive YOY numbers continuing through next summer. Mortgage rates are unbelievably low. Home prices in many parts of America are now very affordable.  And people are still getting married, having kids, and getting that first promotion at work.  All the traditional reasons why people buy homes are still very much in play.

We all need some positive signals from Washington that they are going to begin to balance our budget and that they truly understand what it takes to create jobs in America.  A lot of people have been postponing decisions since as far back as 2007 because of the political and economic uncertainty. This has definitely created a tremendous amount of pent-up demand for both new and existing housing.  If we get ANY good news at all, we could all be pleasantly surprised at the pace of a sustained rebound in home sales.

If you’d like to discuss this or if I can be of service in any way with your real estate needs please feel free to give me a call or send an email.

Best regards, Sharon



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