When will YOUR housing market recover?
Pundits love to make predictions as to when home prices will stabilize in U.S. housing markets. But even well-respected forecasters and analysts may disagree, and even if a forecast proves true nationally, your local market may behave in a wildly different way. This disconnect between broad-stroke forecasts and small-scale local markets presents quite a puzzle for homebuyers and home sellers, who need to make major financial decisions on the basis of facts, not fiction.
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Two examples nicely illustrate the divergent opinions of respected economists, some of whom suggest a housing rebound is just around the corner and others of whom say a recovery could take years just to get started.
Lawrence Yun, chief economist for the National Association of Realtors, expects a “soft” first half of this year for housing and the economy and then “notable improvement” in the second half of the year. But U.S. Treasury Secretary Henry M. Paulson Jr. notes in a recent speech that “most forecasters expect a prolonged period of adjustment” in housing.
Who’s right? In the long run, both comments may prove prescient because the national housing market is more than large enough to encompass a wide variety of trends in different places and on different timelines. And that means, at the end of the day, you’ll need to rely on your own best judgment to make decisions for yourself and your family.
Local data may be more meaningful for homebuyers, sellers
So how can you figure out when home prices and sales hit bottom and begin to recover in your neighborhood? You may need to do your own research to find the answer. Dig up facts and figures about your own city or town and then combine that data with information about national trends to formulate your own conclusions.
Plenty of data are as close as your keyboard, though the process of sifting through it may take quite a lot of time and thoughtful analysis. If you’re tempted to skip out on what may seem like a burdensome homework assignment and instead rely on your own gut instincts, you might want to take a tip from Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate in Los Angeles. He says, “some investors are very instinctual and this has worked out well for them, but most of us rely on the acquisition of information.”
Get your data straight from the original source
For starters, here’s an overview of some of the data and the organizations and agencies that collect and disseminate it:
Check these organizations for housing data
Supply of for-sale homesForeclosure rates•National, state and local Realtor associations•Federal Reserve Bank of New YorkMedian home pricesResidential construction starts•National, state and local Realtor associations•U.S. Census BureauVolume of homes soldResidential building permits•National, state and local Realtor associations•U.S. Census BureauEmployment and unemployment ratesHomeownership and housing vacancy rates•U.S. Bureau of Labor Statistics•U.S. Census Bureau
Supply of for-sale homes a key indicator
If you don’t want to indulge in that much research, zero in on the most important statistic, which, Gabriel suggests, may be the supply, or “inventory,” of homes that are for sale in your local area.
“There is a whole litany (of factors that affect housing) — home sales, housing starts, building permits, house prices — and all of those are important indicators,” he says, “but the inventory numbers in particular are really important.”