The use of national housing statistics has been a key source of confusion for consumers, real estate brokers, lenders, media, financial markets and government agencies among others. The statistics are often applied to local markets and properties. The reliance on these numbers for ground level use has a pet peeve of mine for many years.
When Radar Logic rolled out its first RPX Monthly Housing Report on October 2, 2007, we made sure that the focus was geographical housing patterns.
>The report effort was based on the premise that there is no national housing market; rather, each of the MSAs, while having some economic influences in common like mortgage rates, is influenced primarily by local conditions.
I was encouraged by the release of the latest batch of market reports this week that have begun to make this point more clear in their press releases. When the market was rising, press release jargon tended to be much more focused on national numbers. I suspect we will see a shift in orientation since this is really a false premise.
Office Of Housing Enterprise Oversight [OFHEO] – November 29, 2007
>The figures were released today by OFHEO Director James B. Lockhart, as part of the
quarterly report analyzing housing price appreciation trends.
>”While select markets still maintain robust rates of appreciation, our newest data show
price weakening in a very significant portion of the country,” said Lockhart. “Indeed,
in the third quarter, more than 20 states experienced price declines and, in some
cases, those declines are substantial.”
National Association of Realtors – November 28, 2007
>NAR President Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., emphasized that all real estate is local. “Keep in mind that home prices are up in 93 out of 150 metro areas, and there is a lot of confusion in the market from reports about national data. Broadly speaking, home prices in most areas are up modestly or fairly stable,” he said. “Areas with population or job growth are seeing the strongest home price gains.”
National Association of Home Builders [NAHB] – November 27, 2007
Their comments on the release of the S&P/Case-Shiller numbers this month…
> “We need to put these numbers in proper historical context by analyzing them over the long term, rather than in one-year increments,” said Brian Catalde, president of the National Association of Home Builders (NAHB) and a home builder from El Segundo, Calif. “The statistics released today also reaffirm that all housing markets are local, and conditions in them are dictated by the local economy and job market.”
UPDATE: Economist Humor: A friend of mine, who happens to be a well respected economist, mentioned to me last week:
>…there are 3 kinds of economists: the kind that can count and the kind that can’t.
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Jonathan – Cheers! I agree with you 100%. It annoys me terribly when I hear people quoting statistics/theories/opinions based on what is happening Nationally and try to label those things as constants for every market across the country. There are pockets that are doing quite well right now. Sorry to say that my Market in Massachusetts is not one of them but I suspect the market will be much improved in the Spring of 2008.
No question there is no national housing market and national stats definitely are misleading. But nowadays there is a national (more or less) mortgage market that influences house prices everywhere. Anecdotally, it certainly seems as if price correlation on a national basis is higher than it used to be.
Ralph – agreed – there is a national mortgage market and its been that way since Fannie and Freddie were founded or earlier. Because of the significant upheaval its impact and connection to housing is greater than in year’s past.
I would have to agree that real estate is local predominantly because of employment, but I would also caveat that as having diminished over the past 5 years with the “shrinking” digital world allowing anywhere to be “local” for real estate investors. For some examples:
*A small subdividsion across the street from my ranch in central Florida had about 120 homes built during 2004~2006. About a third of those homes were sold to non-local buyers (and about 10% of the homes are already in foreclosure).
*The SW Orlando communities of Championsgate and Reunion hae 60~80% of their homes owned by non-locals (over 50% international).
*A broker friend tells me that over a quarter of all the homes she has sold in the past few years were to buyers she never met, with everything being done electronically. The buyers never even come look at the houses on which they just spent at least a quarter-million dollars.
*All it takes is a CNNMoney.com article on how San Antonio real estate is undervalued, and three months later the local papers are running articles about S.A. real estate agents being inundated with out-of-state investors purchasing homes sight-unseen.
Buying a house to live in is a very local market (down the the street/subdivision), but the growth in both the internet and real estate investors has nationalized real estate over the past few years. Investors from California/NY/etc buy homes in Florida just because they are cheaper than the same home in California/NY/etc (and must therefore be undervalued), even though the local economy cannot support higher prices, and this has been repeated in lower priced communities throughout the country. It is the de-nationalizing of these local markets that is causing so much of the current situation. Real estate is still local, but the recent affect of the national investor cannot be ignored.
I agree, variant segments within the market are doing quite well, the overall results cannot and should not interfere with regional markets. What charlotte is doing in terms of sales does not directly correlate with that Phoenix is doing.
I know that people are moving like crazy to Kentucky and Tennessee. Land has been on the rise here for the last 5 years and there are so many new houses being built, I can’t believe it!
Great Blog!
ELMO
[…] Is No National Housing Market.” Also another good one with the same title on the Matrix Blog. Basically they point out that while all markets are influenced by things like the mortgage […]
I’ve never been one to listen to national statistics. Generally, the press will only focus on the overall housing slump, without ever mentioning the areas that are picking up. Thanks
[…] it is easy to lose site of how local real estate actually is. I agree with Jonathan Miller that There is No National Housing Market and it is more important to focus on the market where you live and/or where you will be […]
National real estate forecasts are about as accurate as national weather forecasts!