Residential Real Estate Forecasters Wanted!Marc Roth
It is heartening that much of the business press is coming around to my position that the residential real estate market is poised for a rebound.
But not everyone agrees with me. Consider this from reader CS, who responded to my column arguing that now is a good time to buy by writing:
"This article or versions of it appear all over in mainstream media and should be called what they are: real estate industry advertising. Housing prices have a ways to fall before they are in line with incomes, especially since so many people are losing their jobs or fear they will. It isn't any more a 'great time to buy a home' now than it was when the industry's 'buy now' campaign started in about 2006 or so. It's shameful that the media repeats it as if it were 'news' or even credible opinion."
So who is right? Folks like CS—who make a credible case that any economic recovery is fragile at best, and so we shouldn't expect to see a jump in housing prices soon? Or people like me—who think that real estate prices are heading higher?
Go to the Original Sources
Well, I guess you could read a bunch of articles that make arguments for and against a housing recovery and then try to determine who made the most credible case. However, as CS states, that would subject you to persuasion by "the mainstream media" and having your opinion swayed by who yells the loudest, or who can come up with the most clips, isn't particularly satisfying.
At the risk of getting myself drummed out of the Real Estate Prognosticators Union, let me offer an alternative. Create your own conclusions by consulting the exact same sources the experts use in forming their opinion. (For those that still might think my suggested resources are biased, feel free to find some others and publish them in the comments section for others.)
For starters, you might want to turn to the Case-Shiller National Home Price Indices. These are indexes of average single-family home re-sale prices, one for 10 major markets and the other for 20 representative major markets nationwide. (Full disclosure: This information is part of Standard & Poor's, which, like BusinessWeek.com is owned by The McGraw Hill Companies.)
Both of these indexes started in the year 2000, with a base measurable at that time of 100. Prices in both indexes peaked in June 2008, with the 10 markets near 226 and the 20 around 206. The recent July report listed the May 2009 averages at 151 and just under 140 respectively, up slightly off their all-time lows.
In addition to giving you the average prices for the 10 or 20 markets that make up the index, Case-Schiller gives you data on the individual markets themselves. That can be telling, if you believe as I do, that housing trends start in the West.
Where to Dig Deeper
Another data base is the National Association of Realtors' Housing & Economic Statistics. There is some tremendous information—both historical and current—that can help you figure what is going on in real estate prices as well as tools that can help you forecast trends.
Particularly helpful is the Existing Homes Sales section within the site, which provides summary data not only year by year, but also month by month, so that you can track what is happening with the sales of home that have already been built. The link also gives you inventory levels on existing homes and breaks the data down by region.
Once you are on the site, dig a little deeper, and click on the Pending Home Sales Index Overview, considered by many—including me—to be a credible leading indicator because it measures signed real estate contracts.
Much like the Case-Shiller site, the NAR site provides explanations supporting its data-gathering methodologies.
Finally, head over to the U.S. Bureau of Labor Statistics as well as the Mortgage Bankers Assn. research and forecast Web site, which provide a gold mine of data. You'll find (among other things) historical and current national and state unemployment rates, the consumer price index, producer price index, employment cost index, and many more factors that influence housing prices.
There, the secret is out. Armed with the data, you can download to them to Excel and manipulate to your heart's content.
(If you conclude that prices are indeed going higher, next time we will talk about how you can benefit.)