 To hear some newspapers and Web sites tell it, real estate is so bad these days, it will kill you. Or at least make you sick. I came across a headline not long ago that described the real estate market as toxic. Other reports are only slightly less dire, using words like plunging, malaise, abysmal, bubble … the list goes on.
It may be time to step back from the cable news shows and gain some perspective on what’s truly going on in real estate.
You would do well to look beyond the dramatic headlines and descriptions and delve into some real numbers. In Texas, the numbers tell the tale of a steady market. What you’ll find statewide is fewer homes sold this year through September than during the same period last year, but only by 4%. The number of houses on the market is up 15% from last year. The median sales price is up 3% and the average sales price is up 5%.
I’m not going to tell you what you should think about those numbers – you can decide for yourself. And, of course, local market conditions can vary widely. Personally, though, I have a hard time tagging a market like that abysmal or toxic.
Another news story I came across recently characterized the drop in home sales as the largest decrease since the Great Depression. Wow, that’s truly horrible! But does that mean that our country is facing another period like the Great Depression? Is housing in that terrible a state? When you think about it, perhaps the drop had more to do with how high the number of sales climbed over the past five years than how low it is now. |
Let’s consider the evidence of a real estate market “bubble.” When tech stocks took a dive from their peak, the NASDAQ Composite index dropped by more than half. In Texas, home prices are up just a bit from last year. Even if you look at the entire U.S., two-thirds of markets notched positive price growth in the most recent quarter.
What about the subprime mortgage mess? No doubt, that’s a serious problem, and the repercussions stretch out beyond the foreclosures occurring to people who can’t afford their loan payments. Again, though, some perspective may help frame the scope of the problem.
About 9% of borrowers have a subprime loan. And among subprime borrowers, approximately 5% face foreclosure. That’s not to diminish the problem as a whole or for the homeowners affected. Without those numbers, though, you might get a very different impression from the headlines. Some sound bites make it sound like every other homeowner has a subprime mortgage, which is practically a synonym for foreclosure.
So maybe the real estate market isn’t poison after all. Perhaps if you form your own opinion about what’s going on out there, you might decide it’s not the worst time to put your house on the market since 1928. You might even decide not to put off your decision to buy a home after all. That is, if you can even find a mortgage in this toxic, plunging malaise.
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