The headline for this article — New-home sales drop to record low 276,000 yearly rate — freaked out a lot of people, “record low” being the phrase that caused most hearts to skip a beat.
Remember June of this year? When I posted about the dramatic turn the local market made in May? As I said then, it doesn’t matter what the results of one month tell us, what matters is what the results of many months in conjunction tell us.
In addition, just one piece of information can seriously mislead. If you only read that article and nothing else written about July sales, you can come away with a false impression of July’s nationwide real estate market. Quotes like this forecast a gloomy outlook for the rest of the year:
“With shadow inventory, rising foreclosures, little job growth and more stringent access to credit, weak sales will persist and the industry’s headache will linger…”
However, if you read this article, too, we see that sales were up in July.
There’s a magic word in there – pending. A pending sale is a sale currently in escrow. It is in the process of closing, becoming final. Escrow can take anywhere from 30-60 or more days to close. What the July figure in the second article reflects is that people made offers and they were accepted in July. The July figure from the first article shows CLOSED sales. So, the total number of final sales were down, but the number of sales in process rose. Also, that final sales numbers quoted was for new construction, which is a separate section of the market all its own.
So, now that we’ve taken a look at the nationwide market, let’s focus on some local, Tri-Cities real estate numbers.
Our pending sales are down compared to last year, quite significantly, as a matter of fact: July 2010 pending sales are at 69% of July 2009’s stats!
However, our new construction final sales are up significantly as well. In July 2010, 605 new homes were sold, which was 33% of the entire sale pie. In July 2009, only 378 new homes were sold, which was less than a quarter of the total sale pie.
These numbers on their own sound scary and encouraging, respectively. However, combined in the larger picture of the market, both are actually encouraging. As I wrote in June –
…we are coming off of a banner January through April. Sales were at, on average, 146% of the same month the year before.
We had great months earlier in the year, and July of 2009 (which July of 2010 as compared to) sported pending sales far higher than any July of the several years preceding.
Read the numbers. Read ALL the numbers, and then make your decision. If you’re having trouble deciphering any of the numbers in the context of the big picture of Tri-Cities real estate, please give me a call at 509-430-5342.