Read Beyond the Headlines to Understand Housing Issues

Today’s headline “Home sales, prices tumble” on the front page of the business section of my local daily newspaper was ominous: This headline, in Florida’s largest newspaper (the St. Petersburg Times), is followed by a secondary headline that explains: “The slump, the worst seen in 16 years, is predicted to worsen.”

The media have been extremely negative when reporting on the housing industry lately, but you have to read behind the newspaper headlines to fully understand current housing issues.

“Tumble” is a strong word to describe the current housing situation, especially given that the headline writer chose that word to describe a decline of two-tenths of 1 percent. Even Jack didn’t “tumble” after he went up the hill with Jill — he simply “fell down.” It’s not all gloom and doom in today’s housing industry, people – not that you would know that from media reports, though.

The St. Petersburg Times newspaper story, written by the Associated Press, states that sales of existing homes declined for the fifth consecutive month in July while the number of unsold existing homes increased to a record level.

But by the third paragraph, we get some perspective: “Sales of existing homes dipped by two-tenths of 1 percent in July compared with June to a seasonally-adjusted annual rate of 5.75 millions units,” as reported by the National Association of REALTORS®.

A dip of two-tenths of 1 percent used to be characterized as “largely unchanged.” Now it’s a “tumble.” And two-tenths of 1 percent of 5.75 million is actually a drop of 11,500 home sales for the month, or about 371 fewer homes sold per day in the entire country.

That is a negligible amount — no matter what the economic current landscape. (If the Dow Jones Industrials average fell two-tenths of 1 percent in one month, it would lose less than one point per day.)

In the same vein, the story states that “median price of a home sold (in July) slid to $230,200, down by 0.6 percent from the median price a year ago.” That’s less than $1,400 from a year ago, not the 10 percent or more decline the media has hyped over the past few weeks.

The media report states that we are in a “record stretch” of 12 consecutive months of declining home prices and “the rising glut of unsold homes is putting downward pressure on prices.”

Yet while there are “raised worries about a possible recession … many economists believe the Federal Reserve Bank will ward off a full-blown downturn by reducing a key short-term interest rate should financial markets fail to stabilize.” The Fed has already taken steps to alleviate the problem and undoubtedly is considering additional measures.

Some areas of the country actually saw a rise in sales last month, including Seattle, Portland, Oregon, Charlotte, Dallas and Atlanta, CNN reported. By region, sales rose 1.8 percent in the West and 1 percent in the Northeast, while sales in the South were unchanged.

“The rise in sales and prices in the Northeast region on a fairly consistent basis in recent months is promising because this was the first region that underwent sales and price weakness after the boom,” said Lawrence Yun, chief economist for NAR. “It appears (the Northeast) will be the first region to climb back, indicating other regions could follow a similar path.”

Conclusions

What does all this mean for people who want to buy a home in the next few months?

It means you should tread carefully. It has been a buyer’s market for about a year. Sellers have seen the relative value of their homes decline. Volatile markets offer many opportunities and many traps.

If you have planned for some time to buy a home and you have gained knowledge, become prepared and have gained control of your finances, including having money saved and available for down payments and closing costs, you should proceed. Many sellers are eager to make a deal and may offer price reductions and other incentives to complete a deal.

Some buyers are waiting for the market to hit the bottom — thereby getting the best price — but it’s hard to say when the bottom will come and the market will begin a resurgence. Some sellers may choose to withdraw their homes from the marketplace until the market improves and their property values rise to equivalent levels of two years ago or higher.

Many would-be buyers are also sellers — they need to sell their existing home before they can sign a contract to purchase a new home — so they are stuck in a Catch-22 of sorts: they want to get the best deal on a new home as prices fall, but as prices fall, their existing home commands less and less from would-be buyers.

We’ll continue to analyze the headlines here and look past the hype — whether the hype is negative or positive — to offer important information to home buyers.

Just remember to look past the headlines because the news is rarely all one-sided.

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