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A Return to Normal in Housing Markets?

July 5, 2011  |  by John Heithaus

 

Today’s Wall Street Journal Front Page shows a chart by Bob Shiller which illustrates, as Mr. Miller has already opined, that we’re finally seeing a statistical return to “normalcy” in the housing markets.  This means, per Shiller, that housing values will grow “at the same pace with the inflation rate” (or course barring extraneous market influences like a big spike in rates, changes in the mortgage interest deduction, etc.)

I’m interested in what all of you are seeing in the MRIS markets —  does Shiller’s view make sense in today’s market? Is information like this of value to you in your business with buyers and sellers? Let us know your thoughts! Thanks … John

Posted in Blog, MRIS CMO Insights

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15 responses to “A Return to Normal in Housing Markets?”

  1. Every day brings a new chart, statistic and headline about the real estate market. Our market is headed in a couple of directions at the same time. With high unemployment and high uncertainty, I think it's impossible to know where the market will be over the next year. One-off charts like this don't add clarity, and only add to the confusion. IMO.

  2. Lucy Keller says:

    I agree with the previous comment. This one off chart provides more gobbly gook that does nothing to make buyers and sellers feel more secure in their home investment. It is a shame that the Wall St. Journal adds to confusion rather than clarity.

  3. MRIS_CMO says:

    Bruce and Lucy: I hear you. And to an extent I concur. First, to Bruce's point, there's way to many "experts" out there that confuse rather than guide and, worse, to Lucy's this creates an insecure feeling with Buyers and Sellers that makes the REALTOR(R) job that much harder. And, as Jonathan Miller mentioned to me in a separate message, this chart came out in the midst of a ton of doom and gloom reports, so it seems incongruous at best and, misleading at worse.

    But that's not my point. I believe we (buyers, sellers, Agents/Brokers) need to see a solid return to "normalcy" to put all these "weather forecaster" style reports to rest. Stability is our "friend" in this environment, and IMO that's the message that's of value! 🙂

  4. I would like to ad that, our market (Metro Area) is so different than the rest of the country, that most general charts don't corelate with what's going on around here. How could you explain to a client a shortage of homes in certain areas of Fairfax County.

    However, I'm glad to hear of good news any time 🙂

  5. Karen says:

    In the montgomery county area, we are seeing homes that are priced right and in good condition going fast, sometimes with multiple offers. National stats often mean little. Real estate is hyper local. Know your market, price it right and it will sell.

  6. Alan Kroll says:

    The biggest single factor contributing to a return to the a normalized trend line is the slow release of REO inventory into the market. The part of the market which is the most destabilizing is due to erratic pricing of short sale inventory. If banks had a standardized discount for short sales, market minus 5% or 10 %, and actually pre-approved short sales we would get to true stability much faster. Builders have been selling new homes at a brisk rate in Loudoun County because they have been doing a better job of defining their markets, setting consumer expectations, and maintaining pricing consistency. Right now we have multiple markets running on different levels of stability, and as such we don't trust the one size fits all charts.

  7. Sharon Mulholland says:

    This evening on TV Mike Huckabee labeled our Washington, DC Metro market as being the only market in the country that was doing well and the term “inflation proof” was once again used to describe our area. In Montgomery County the market is extremely “pocket” sensitive, and we have to know our listing community intimately. Don’t even think of listing a property that isn’t in great shape and has not been staged!

  8. Jeannine Wayson says:

    I don’t know about Montgomery County, but the “pocket” theory is accurate even in the same zipcode. In Anne Arundel we can have a townhouse development with sales imploding (falling like rocks) while the neighborhhood next door of single house sales is stable, with the same type of homes down the street unable to move at all and waterfronts declining at a slower rate or maybe even rising.

    Factors for the variation in price differences vary themselves. And the differences for the variations can range from anything including schools, location, condition, perception, etc etc etc…

    With 1,000,000 more foreclosures destined to hit the market this fall, 4 million more people 90 days or later with their mortgage payments, the only article that made any sense lately was in Business Week. July 11-17.

    And without the insurance fund (tarp) for investors, the Obama Debt Forgiveness Act for peole in trouble, I don’t know where we would be.

    FURTHER, the act due to pass by the Administration to slow foreclosures will actually HELP stablize or divert a “crash” in a market that has been headed this way for decades.

    The only thing I can say is hold on to your hats, learn to work with your sellers, and support them with the facts….from all indications this market is going no where for the next decade…unless we have some sort of miracle and that won’t be a political one….its not possible….there’s no one out there with a “cure”.

    Finally, you can still make money even in this environment. If we have learned anything, no matter what the market conditions people want to move, they want to sell and they want to buy. Being “out there” with your clients, others in the field, knowing the environment and practicing good business sense is what will have us continue to succeed….it isn’t easy, but it is possible…

  9. It is ultimately market-by- market. I practice primarily in Prince George's and Anne Arundel counties. In AA I find things are stabilizing, but the inventory is lower and I am finding about 75% of the market is traditional sellers. In PG however I find statistical trends (supported by RBI Data) that we are declining in market value at 1-2% per month. And what I have heard back channel is that the "shadow inventory" for that county could exacerbate that decline even further. I have done multiple CMA's in PG over the past 180 days and in almost all areas (doing a radius search) 50-70% of the market is distressed (bank owned and short sale.) With 9.2% unemployment, we could see give back that exceeds the mid 1990's if the economic fundamentals are not restored in the economy.

  10. Ray Barnes says:

    The Shiller Reports seem to contradict themselves; the one before the latest seemed to be negative in outlook…it's like someone pulled him aside and said now you need to say something positive…hard to take him too seriously.

  11. All the reports on home value are looking in the rear-view mirror of past sales and market performance which approaches the subject of home ownership as if it were more like a tradable security. For the individual home owner ( and majority share of the housing market ) it isn’t! The real value is to the consumer who wants to establish a known cost for housing through ownership relative to their alternatives. Homes are a place to live for those who have a reasonable expectation of being in that home for several years and the other factors are present which helps their overall financial health. Until all concerned return to the real reasons for home ownership, there is bound to be instability in the housing market. The month over month, year over year valuation of residential real estate as if housing were an investment similar to stocks, may be useful to economists, taxing authorities and real estate professionals but it is not serving the consumer.

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