Sarasota homes for sale wave goodbye to taxpayers’ generous $8,000 tax gift, raising concern over National Association of Realtors’ latest Pending Homes Sales Index.
Charts are charts, even LESS important when they're NATIONAL reports!
Always remember, all real estate is LOCAL.
PLEASE avoid concern over predictions, indexes, reports and/or comments pertaining to the US housing market.
For instance, the National Association of Realtors (NAR) issues NATIONAL reports – not local reports. By the way, local reports require careful examination, as numbers often do NOT reflect real market health.
Real estate is local….
Now, with that cleared up, let’s take a look at NAR’s latest chart showing Pending Homes Sales, prompting friends to email me with questions.
Was the Pending Home Sales Index really that bad…and should NAR’s index concern any of us at all?
Click Read More below now for the only data of concern for Sarasota realtors, real estate investors, house hunters & home sellers.
NAR REPORT SCARES SARASOTA HOUSE SELLERS…UNNECESSARILY!
NAR REPORTS: Pending Home Sales Index plunged in May 2010, just one month after the expiration of the federal home buyer tax credit program.
Who’s shocked by NAR’s Index?
Naturally, NAR’s Pending Home Sales Index, reportedly at a record-low level, has people not familiar with LOCAL market reality worried. Whenever NAR issues a statement or report or Index, major news outlets pick it up and hit all of us with Chicken Little’s rendition of “The Sky Is Falling.”
Clearly, the sky is not falling, though Sarasota Real Estate is far from “out of the woods.”
NAR expects the summer’s Existing Home Sales to be weak. With fewer homes going under contract, fewer homes can close.
By the way, a “pending home sale” is an existing home under contract to sell but not yet closed. According to the National Association of Realtors®, 80 percent of homes under contract close within 60 days.
With or without NAR’s index, Sarasota expects inventory to rise as:
- Home sales drop in most markets
- Home prices drop in most markets
- Mortgage rates are at all time lows
Indeed, sellers will compete for fewer buyers, and the “winning” buyers are financing their homes at the lowest rates in history.
Market Timers Chart Profits…or can they?
My friends, some of them first-time buyers and some of them real estate investors, believe they can “time” the market and score a better deal at the bottom.
They believe THEIR local markets will drop even more.
Hmm, best of luck to them. Unfortunately, I don’t have a crystal ball, affording me the opportunity to predict or time the market…any market (real estate or stock market and I have the scars to prove I can’t time either market).
What I can predict does NOT require a crystal ball or Sarasota Association of Realtor’s LOCAL market data:
- SHADOW inventory (that is, all those once nice homes in nice neighborhoods such as my own neighborhood with houses rotting away (abandoned, overgrown & not maintained) for more than 24 MONTHS…. This is market reality. This is why I do NOT participate in all the realtor “happy talk” about market recovery.
YES, increased sales have occurred.
YES, median price increased.
Important: How much credence should you put on all the happy-talk telling you (and me) the median sales price is INCREASING, suggesting market recovery? Here’s why I think little of median price.
Example: The median sales price is “the number in the middle” when the sales prices are sorted in order. For example, consider (only) 5 property sales during the month:
$55,000 $78,000 $100,000 $250,000 $380,000
The median price in this example is $100,000.
However, if there happens to be an even number of scores there is no number in the middle so the two numbers in the middle are averaged:
median = ($91,000 + $84,000)/2 = $87,000
The mean of the numbers, as you can see, can be misleading as well.
Here’s another powerful example discounting all the happy-talk about “median” or “mean” sales price. If I tell you the mean sales price of houses in my neighborhood is 2 MM you might incorrectly think I live in a “high-end” neighborhood. But maybe the neighborhood is a poor one with just *one* house worth 26MM. Of course, this is highly unlikely but hyperbole emphasizes my point. The average (or mean) will look much better because one number is very large.
You see, getting giddy about increased “median” home sales price or even the “mean” is not accurate enough…but it sounds great when reported.
The median and the mean together give a better idea of the spread of the numbers. If there were one really wealthy person then the median income would be quite low.
Enough to sustain market recovery?
NO!
Every property that sells is good news. However, to suggest Sarasota real estate has bottomed & on the way up (again) is very premature, especially as shadow inventory piles up.
Want to venture a guess at what happens to median price when shadow properties (especially those properties overgrown, moldy & lacking maintenance for more than 24 months) slam the market? I want to hear what you think. Scroll down & leave me a comment. Tell me what you think.
Sarasota homes for sale expect LOCAL market data, not NATIONAL data (charts) scaring buyers, realtors & sellers. If you or someone you know wants to buy or sell a house in or around Sarasota (FL), please call me.
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