Another Real Estate article in the Star Ledger today, this time by staff writer Sam Ali.
N.J. home sale fever breaking, data show
Sometimes the numbers don’t tell the whole story, housing experts said yesterday after glancing at home price and sales statistics from the National Association of Realtors.
At first blush, everything seems rock-solid: The national median price of a single-family home — the point at which half sold for more and half sold for less — rose a healthy 14.7 percent to $215,900 for the third quarter, compared with$188,200 in the same period a year ago.
Unfortunately, for folks like Joe Natale, a mortgage banker and builder based in Cranford, the NAR’s third-quarter numbers are a bit stale.
“We’re already in November, the middle of the fourth quarter, so those numbers are already yesterday’s news,” said Natale, president of First United Mortgage and JDN Properties. “Today the world is a very different place.”
Like we all said yesterday, we knew the Q3 numbers were high, we saw it first hand, however, it didn’t stop the media and the NAR from trying to spin the data to make it look as if we didn’t just go off a cliff.
“I believe the NAR numbers don’t reflect the last 45 to 60 days in the market,” said Dominick Prevete, regional vice president for northern New Jersey at Morris Plains-based Weichert Realtors. “In the short term, buyers have been on hold by some recent developments, like the Hurricane Katrina and the quick run-up in energy prices. Those things had people scared and a bit frozen.”
It’s our old friend Dominick Prevete again. You might remember him from “Debunking Another Real Estate Puff Piece”, a few weeks ago, I think I may have called him a skirt wearing, pom-pom shaking cheerleader for saying the market was a “win-win for buyers and sellers” and recommending risky loans. It seems he’s changed his tune a bit, so I wonder if he read my article (I did see alot of hits from Google showing that folks hit my site searching for his name).
Again, however, I must call you a moron Mr. Prevete. What impact would the hurricanes have on buyers in New Jersey? In case you missed it, they didn’t exactly hit here. Or are you just looking for something to blame, calling it only a short term downturn once we get over the pain of the hurricanes? And run up in energy prices? If the recent uptick in energy prices made it hard on someone to purchase a home, I really don’t think those people should be buying a home in the first place. These prospective buyers must be pretty strapped for cash if you are blaming an increase in gasoline prices on the decrease in sales. No Mr. Prevete, the reason people aren’t buying is because more and more people realize that real estate isn’t a “win-win” investment, and you can lose alot of your hard earned money. Buyers know we are in a bubble, and they are smart enough not to buy.
What will happen to the market when buyers realize they have the power to control prices?
Caveat Emptor,
Grim
That’s it. The blame game has started. Katrina is bursting the housing bubble….soon it will be President Hugo Chavez high jacking gasoline prices……Chinese want to mess us up by not buying our low return treasury……..finally probably will be the liberal media reporting “false” housing bubble bursting news in order to hurt George W.
But no one will ever discuss the unreasonable run up of prices, homebuyers “inflated” expectations or the artificial low rate environment.
But no one will ever discuss the unreasonalbe run up of prices, homebuyers “inflated” expectations or the articized low rate environment.
Just 2 months ago they said Katrina would help boost the housing market because of all the people that lost their homes.
Richie
Don’t forget about blaming the proposed tax changes for bursting the bubble either! Natural gas prices will be next on the blame list. Maybe a windfall profits tax on natural gas could be used to subsize the NAR.. errr. I mean to subsidize homeowners.
jb
It’s more like DENIAL!!. Ooh Grim congratulations on your article in last Sunday’s Star Ledger
BIRD FLU CAUSED THE HOUSING BUBBLE TO BURST IN 2005
NAHB Builder Sentiment Index falls to levels not seen for three years..
US home builder sentiment index falls in November
NEW YORK, Nov 16 (Reuters) – U.S. home builder sentiment declined sharply in November, the National Association of Home Builders reported on Wednesday, responding to sharply lower measures of consumer confidence and rising mortgage rates.
The NAHB/Wells Fargo Housing Market index slid to 60 in November, seasonally adjusted, from October’s revised 68. The index is also down from September’s reading of 65, which was the lowest reading since July 2003.
grim
Grim:
As much as I have been a proponent of a real estate bubble for a significant period of time, we still have no evidence of price depreciation.
I think you should be making a clear distinction to your readers that a slow down or reductions in asking prices do not signify a bubble bursting. What we are experienceing at this point is a cessation of the bubble inflating.
We still have no trigger on a “pop”. Something else is going to have to change sentiment to doom and gloom. Right now people have a “wait and see” attitiude, not a jump off the bridge.
chicago
Chicago,
I agree, we don’t know the bubble popped until the bubble popped. But by that time, everyone will know the bubble popped and there will be nothing to prove. It’s the problem inherent in using lagging indicators.
Can I say the bubble popped today? Sure, that’s my opinion. Can I prove it? No, it’ll likely be months down the line until I can show actual proof of the bubble pop. And just so you know, here is my definition:
A set percentage of homes sold in a given period where the selling price is less than the purchase price adjusted for inflation.
What percentage of homes? Subjective. What period? Subjective. What percentage of decline? Subjective.
The NAR say that real estate has never gone down in value, I say it has. Who is right?
A speculative bubble, almost by definition, is an increase in asset prices backed by the promise of future returns. To say it another way, the reasons prices went up so high is because people saw them going up high and bid them even higher in hopes they would continue. Thus, the cycle is broken as soon as no new buyers enter the market to push asset prices higher. At that point the whole game collapses.
Why does there have to be a single trigger? It’s naive to think there was a single cause to this bubble, more naive to think it’ll take a single event to end it.
grim
Let me go on, just because I’m a bit upset about your comment.
The movement in home prices in Northern NJ over the past few years constitutes a speculative bubble. Why? Because home prices typically very closely track inflation. They’ve derailed off that track. They’ve also become detached from underlying wages and rents.
Historically, no speculative bubble has ever plateued and remained at that set price. It simply doesn’t happen. Why? Because an asset bubble is driven by asset appreciation. Once appreciation has plateued, the driving factor behind the bubble has been removed. Prices than collapse to the levels expected based on fundamentals.
I post the data I post because I view that data as real time indicators into market psychology. Sellers don’t reduce prices in rapidly appreciating markets. Since we only really have access to the MLS sales data, we can imply that a reduction in asking prices, or a sale below asking price, constitutes weakness in buyer motivation and buyer willingness to pay.
To date, we have not seen any signs of weakness in the seller market. Large numbers of price reductions or sales under asking were unheard of recently.
This is a clear indicator to me that the bubble is nearing (or has already passed) it’s collapse point. Unless wages and rents increase some 30% in the next year, real estate will be headed downwards rapidly.
grim
Chiago,
I believe the housing bubble is driven by homebuyers’ “always go up” expectation. It will be diffcult to qualify a trigger for homebuyers’ expectatoin.
All other housing related data (home prices, inventory, time on the market) are collected after the fact. And they are often unreliable. Since agents have good control on these data……..
Anyway we might never see the trigger. But the time we do, the bubble has bursted.
Grim,
You might be right, but you are missing a few things in your evaluation of the MLS data. First you need to compare your supply data against the Sold/Under Contract numbers to develop a ratio. This is an indicator of current market direction.
Plus, there is significant overlap in the MLS systems that you have listed. GSMLS, NJMLS, HCMLS all overlap and at times when the market is slowing this occurs much more. Why? Buyer’s insist that their property be listed in the other MLS systems to increase exposure.
Thank you for taking the time to post this information and I will check back for your comments.
Hoboken Realtor
hobokenrealtor,
Nice to have you! Drop me an email if you’d ever like to chat. I’d love to talk numbers with you.
I agree about crosslisting, it’s the reason why I never combine the MLS numbers, always listed separate. It’s also the reason why most of my sales/activity statistics are from the GSMLS and not the other systems. I’ve tried in the past to merge data, but gave up on it, it’s too difficult to de-dupe the data to ensure my numbers are accurate.
One of the major reasons I post the active listings number is that it’s a good handle on the supply side, but only a piece of the puzzle. Active listings are alot like the net population, while the net population of an are might stay in a certain range, that number says nothing of the number of people moving in and out, it could be tens, it could be thousands.
Yes, I agree with you about under contract listings. I’ve been going through both the Withdrawl and UC listings to see if I can spot any trends developing.
grim