Public Misled by National Real Estate Indexes
July 21, 2011
William Raveis’ Data Paints Clearer Picture of Key Housing Trends
A confluence of low interest rates, extremely low home prices and the highest affordability rate in U.S. history have created ideal conditions for homebuyers. However, you wouldn’t think that with the onslaught of negative reports from national indicies and various media outlets.
Home values have fallen dramatically since 2006. The New York Times recently referred to Case-Shiller’s national index, stating 20 large cities slumped for the 7th month in a row in February. The Joint Center for Housing Studies of Harvard Review dwelled on the excess inventory on the market. Any of this sound familiar? It should. You can’t open a web browser or scan through a news reader without encountering these kinds of bleak statistics.
An age old adage comes to mind-what is it again? Ah yes, real estate is local. As a key economic barometer for this and many countries, the real estate market is rife with implications of consumer sentiment and mindset. But, how are consumers to make educated real estate decisions about a home purchase in East Longmeadow, MA by assessing average sales prices in Nebraska? If you said they can’t, you’re right.
William Raveis Real Estate, the ninth largest real estate brokerage in the country, is encouraging agents and clients to take a more intelligent approach to the housing market by looking at seasonal trends and the latest data within their own markets. William Raveis utilizes a comprehensive system that tracks major local market indicators from Maine to New York, known as Local Housing Data. This system collects raw data from 16 MLSs’ throughout the northeast-representing the activity of over 65,000 REALTORS- to compile a bird’s eye view into local markets.
“The national indexes are misleading the public to what’s actually occurring in their local markets,” said Bill Raveis, Chairman and CEO of William Raveis Real Estate. “Local Housing Data draws numbers directly from the MLS, rather than relying on formulas used by national indexes. These indexes may be helpful to investors, but do not necessarily measure what homebuyers or homeowners care about,” he continued. Using Case-Shiller as an example, the index does not provide a full representation of the market, focusing only on changes in average sales prices. In addition to average sales prices, Local Housing Data presents key market variables, such as unit sales, median sales prices, inventory, market time and price per square foot. A reader can analyze by price ranges using Local Housing Data, whereas Case-Shiller simply provides composite averages. Looking at the dates of each report, one can see the index is not timely, featuring data with an approximate 2-3 month lag time. Local Housing Data furnishes state, county and town numbers between the 7th-10th business day after the end of the month.
To see an example of the disparity between state and national indexes and local numbers, look no further than Case-Shiller’s most recent housing report for April 2011 and The University of Connecticut’s Real Estate Market Update, published July 15th. Case Shiller showed the nation’s 20 major cities experiencing a drop in home prices for April 2011 vs. April 2010 and The University of Connecticut’s report indicated that the absence of the homebuyer tax credit is depressing Connecticut home prices. However, Local Housing Data presents a different trend. For the past 3 months, including April, average sales prices pointed upwards by as much as 16% in CT and other states covered by William Raveis. Year-to-date, average sales prices were up by as much as 12.5%. “Some of this data, particularly from University of Connecticut, is just plain erroneous,” said Mr. Raveis. “We have the data from the trenches, from the MLSs’, that points to price appreciation despite the lack of a homebuyer tax credit.” The table below displays further detail on price increases for single family homes and condominiums:
Each county and town is driven by hyperlocal market trends, as Local Housing Data proves. In fact, marked differences can be seen between towns that are only within 35 minutes of each other. Shelton and Wilton, two towns in CT about 20 miles apart, show substantial differences in inventory and average sales prices. Shelton’s inventory stands at a relatively healthy 9 months, year-to-date, while Wilton is at 14 months for the same time period. Shelton’s average sales price is $318,268 and Wilton’s is substantially higher at $909,318, both year-to-date.
Local Housing Data has been referenced by major news publications in the northeast to assess market conditions. These numbers, along with careful analysis by William Raveis’ office VP’s, portray key market indicators to be on a brighter path, not heading in the wrong direction.
As an example, PJ Louis, Sales Vice President of William Raveis’ Avon, Connecticut office assesses Local Housing Data for his market, “Unit sales are up, average sales prices are up by almost 14 percent and we are seeing activity in all price points.” “Our local market is definitely going against the national reported trend,” he continued. Louis described this year’s brutal winter to be deterrent to homebuyers and sellers, contributing to a slow paced 1st quarter. However, as soon as the spring market took off, so did a launch in demand. Louis admits this isn’t a 2006 market, but the last couple months in his office have felt busier than the past 4 years.
Further south in Greenwich, site to some of Connecticut’s premiere homes, there is movement in all price points. Sales Vice President, Beckie Hanley cited very encouraging data, including a 14% increase in average sales prices and a unit sales jump by 40% in May 2011 versus same time last year. “We are seeing multiple offers in the $2-$3 million dollar range and buyers who are ready to put their money down when they see value,” said Hanley. Her point draws on an important trend happening in the northeast and other parts of the country: an equilibrium between buyer and seller needs presenting sales opportunities. Simply stated: buyers are ready to make a purchase when sellers set prices relative to the home’s current market value.
This trend is also present in William Raveis markets in other parts of the northeast, such as Massachusetts. Hingham, a beautiful seaside town in MA’s South Shore, is home to very particular buyers. “All buyers are seeking ‘value’ in all price ranges,” says David Friend, Sales Vice President of William Raveis, Hingham. “Buyers are picky about details, but still buying.” A ‘good deal’ is what homebuyers are after and sellers pricing their homes in accordance with market tendencies are receiving multiple offers.
Despite the search for a ‘good deal,’ William Raveis agents have experienced some record breaking offers on unique homes. In Rye, New York there is a pending deal on the market for $12.5 million. “This sale will close at the highest number thus far in MLS history for Rye,” said Marylin Hoffman, Vice President of Sales for William Raveis, Rye.
Record breaking offers aside, the real estate market could very well be improving for a variety of income levels, contrary to reports that the upper echelon of wage earners are the only group of people ploughing through a down market. This is what Wendy Beaulieu, Sales Vice President of William Raveis, Cape Cod, believes is happening in her market. Baby boomers are purchasing second homes due to the high level of affordability on the Cape. Citing Local Housing Data, Wendy states, “average sales prices on the Cape are $370,000. Since affordability is so high and prices are so low, middle class buyers are seeing this as an opportunity to get the coveted second home.”
Milford, Connecticut, is seeing positive movement, as well. Despite the lack of the homebuyer tax credit, which helped buoy housing demand for much of the first half of 2010, Milford’s median sales price has stayed nearly the same for the first half of 2011. “Last year, our median price was $286,000 and this year it was $284,500,” said Herb Mehlman, Vice President of Sales for William Raveis, Milford. This may be a vital sign that the market is beginning to correct itself, without the creation of artificial demand from the government.
As you can see, the proof is in the numbers. Several local markets are showing movement in the right direction and even national reports are bringing some optimism to the industry. The most recent Case-Shiller index reported 13 of 20 major metropolitan areas showed an increase in home prices. Inman News talked about stronger economic data pushing up mortgage rates.
So next time you feel you are about to get trapped in a sense of hopelessness because you hear a scary real estate report on the evening news, do yourself a favor and check your Local Housing Data numbers on raveis.com. You may be surprised find that your town is doing just fine.