You may have recently seen the headline posted on Yahoo Real Estate and CBS-Moneywatch, and started to worry, worry, worry

Why the Housing Market is Three Times Worse Than You Think

By Carla Fried, CBS MoneyWatch.com

Mar 31, 2011

 The first paragraph read:

Between the recent report that sales of new homes hit a record low in February (see #3 below) and this week’s news that 19 of the 20 largest metro areas (see #2 below) tracked by the Standard & Poor’s/Case-Shiller (see #1 below) home price index saw a price slump in January, it hasn’t exactly been a stellar few weeks for the housing market. And yet another data dump tracking foreclosed and distressed homes that have yet to hit the markets – what’s known as “shadow inventory” – suggests things are not likely to get a whole lot better for a long time.

(click this link for the full article) http://realestate.yahoo.com/promo/why-the-housing-market-is-three-times-worse-than-you-think.html 

Rarely do people even read an entire article, so the fact that this particular article states the following caveat way down in the article doesn’t help at all.

  “Of course, even state-level data doesn’t capture what’s going on in your local area. If you’re looking to buy or sell, one important step at this juncture is to look beyond the official sales and inventory data, and try to get a sense of local shadow inventory. This is where a solid and straight-up real estate agent is going to be crucial. You don’t want sugarcoating; you need an honest assessment of what’s in your local pipeline”

 (#1) One of my biggest pet peeves, is that Case/Schiller publishes their market statistics based on Combined Statistical Areas” (CSA’s) and “Metropolitan Statistical Areas” (MSA’s) which are defined up by the Federal Office of Management and Budget (OMB).

The local CSA include the following:

The following is a list of principal cities in the New York-Newark-Bridgeport Combined Statistical Area (CSA) with U.S. Census Bureau estimates of their population.

Obviously including cities like Newark in the CSA, which is what Case/Shiller uses for their reports, seriously skews the statistics, ESPECIALLY WHEN IT COMES TO FORECLOSURES LOOMING IN THE NEAR FUTURE!!  

(#2) The metropolitan areas (MSA) are defined by the U.S. Office of Management and Budget as the New York-Northern New Jersey-Long Island, New York-New Jersey-Pennsylvania Metropolitan Statistical Area (MSA), with an estimated population of 19,069,796 (roughly 1 in 16 Americans) as of 2009. The MSA is further subdivided into four metropolitan divisions (MD’s)

  The Edison Metropolitan division (my service area) includes :

New York-Northern New Jersey-Long Island, NY-NJ-PA (MSA)

Edison-New Brunswick, NJ Metropolitan Division (MD)

  •  
    •  
      • MiddlesexCounty
      • MonmouthCounty
      • OceanCounty
      • SomersetCounty

Again, in some of the above counties of this MD, people over bought homes they could barely afford and are now, or will be, in serious trouble in the near future. But, there are hundreds of localities within each county, and each has it’s own unique market and statistics. However, rememebr that this is NOT what Case/Shiller reports are based on. They are based on the CSA’s or MSA’s!!

I posted this information on February 1, 2011:

The Federal Reserve recently noted that after losing ground in the spring, Americans’ wealth grew 2.2% throughout July-September, and household net worth rose to nearly $55 trillion. But despite this, the value of real estate holdings sank 3.7%. It’s true, the real estate market truly hasn’t fully recovered, and it would be disingenuous to sugar-coat it and say that you’ll easily get your ideal asking price in a week if you sell.

But still, too many people read the second statement above—home prices are down—without taking it in stride with the first: things are improving overall. A lot of us focus on bad news without looking at the good. Home values have not fully rebounded. But the increase in Americans’ wealth means there are more people with cash freed up to buy. Also, these figures don’t take geographical areas into account. Your area might be doing better than the national average; values aren’t depressed in every single market. The best way to know what’s best for you is to ask a trusted real estate professional. Communication is the key to success, rather than hiding when you see a negative headline.

By Dan Steward via RIS media

 (#3) I also posted this information on March 27, 2011:

The OTTEAU Report – Market Commentary by Jeffrey Otteau

Multiple snow storms…reduced NJ home sales in Jan 22% below the prior year’s pace as the housing market turns the corner heading toward spring. This decline was heavily influenced however by January’s record breaking total snowfall as well as the absence of a homebuyer tax credit program. Unsold inventory was essentially unchanged in January. And so, the market’s performance in January may not be a good barometer of what to expect for the rest of the year.

© Copyright 2011 by Otteau Valuation Group, Inc.

Please note that the Yahoo article I refer to in this blog talks about NEW home sales. The quote above refers to ALL home sales in New Jersey.

It should be very apparent that the media thrives on publishing “eye catching” negative headlines to increase readership, but very rarely provides opposing views, caveats, or other data that might refute, or cause a reader to question, the validity of their one-sided articles for the sake of maintaining the “shock value” of their headline.

I believe the caveat made in the Yahoo/CBS-Moneywatch article, is a mild attempt to do just that, but was placed so far into the article that the reader will rarely get past the headline and the first few lines of “news”. 

As a real estate professional, I truly believe we reap what we sow.  Continual negative news only reinforces declining general consumer confidence, which in turn forces declining confidence in real estate, and it becomes a vicious cycle.  I don’t deny that there are going to be a lot of foreclosures hitting the market once the banking institutions get past some of the restrictions placed on them to get them TO foreclosure, HOWEVER, it will not be in the entire CSA area, and certainly will not be in all of the “local” markets.

Don’t believe everything you read !!!

Advertisements