A look at the NAR issues most frequently covered in the news media
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As USA Today reported this week, Crawford, Texas saw a 57 percent drop in existing home sales in July 2006 when compared to the same period in 2005. Before you alert the White House about market conditions around the president’s ranch, however, you might first note that the median home price in Crawford rose 18.5 percent between July 2005 and July 2006, and across the state of Texas, the median home price has risen 6.1 percent during the same time period.
The article also mentions that seven years ago, President Bush paid $1,000 to $1,500 an acre for his land. Today, according to local sources, larger tracts sell for $2,500 to $3,500 an acre.
That underscores the value of housing as a long-term investment. Despite some high-profile media reports, most of the country has never experienced even a temporary downturn in home prices since modern recordkeeping began, even during recessions and periods of sales decline.
Housing is not a quick-in, quick-out investment. When purchased for the long term, housing is one of the safest investments a consumer can make. A home provides physical, financial, and emotional shelter – no other investment can do that.
Top news outlets, including MarketWatch, Reuters and ABCNews.com reported that existing-home sales were down in July, while home prices in many areas were slightly below year-ago levels. Tom Stevens appeared on CNBC’s Closing Bell commenting on the current housing market while David Lereah appeared on ABC World News Tonight commenting on housing inventory levels in a story on the current buyers market.
It seems that a number of media stories these days highlight instances of sellers trying all kinds of things to attract buyers to their homes. But many of these reports overlook the fact that serious home buyers aren’t shopping for a trip to Tahiti; they’re looking for a place to call home. Realtors® who have experience with shifting markets are invaluable in this environment – they know local market conditions and understand the strategies and tactics that will best position homes for sale.
Seller incentives can take a number of forms, and many of them have nothing to do with new cars or trips to Europe. Things like seller financing, lease-to-purchase options, offers of paid condo association dues for a certain time, and assistance with closing costs are just a few of the creative but relevant tactics that can make a difference. Staging and marketing a home for best exposure are important, but Realtors® also know how to structure and assemble complex deals and can recommend incentives that really matter to home buyers.
The halt in interest rates was the subject of a Realty Times article, which quoted Tom Stevens on the housing industry perspective. Time magazine quoted Tom Stevens on a new category of Realtors that cater to the needs of older buyers. Various news media including MSNBC.com and Bankrate.com reported on second-quarter metro home prices and state existing-home sales, which declined slightly from a year ago as the housing market continues to stabilize.
The quarterly meetings of the Federal Reserve’s Federal Open Market Committee are followed closely by the financial media. Dozens are stories quote experts anticipating what they will do go interest rates before they meet, and hundreds are written afterwards, reporting and interpreting what the committee did. Experts after experts pore over the Fed’s tea leaves to read meaning into every move—and non-move—when the FOMC meets.
Yet somehow the FOMC’s decision last week to leave the federal funds rate unchanged (which NAR thinks was the right move) didn’t create the kind of stir on the news pages and the talk shows that one might have expected, especially when you consider that it was the first time the Fed had not raised rates in more than two years. Seventeen straight times the FOMC decided to raise rates.
“Many analysts predicted the pause in rates will be short-lived as Fed policy-makers confront continued inflation pressures,” reported one news service. That may be the case, but the fact is that at least for now the relentless upward pressure on rates has eased and the vital housing economy can breathe a sigh of relief.
We’d prefer to believe the governors paid attention to the impact rate hikes where having on housing and decided—at least for now—to give America’s homebuyers and sellers a chance to recover.
TIME magazine published a story entitled “The Boom Is—Is Not!—Over” that quotes David Lereah. He stated, "We've had sellers' markets for the last five years, and they're transitioning to buyers' markets…Sales go down and prices follow. Sellers are stubborn, so there's a standoff." Realty Times wrote about Realtors cleaning up damaged neighborhoods, building 54 new Habitat homes and bringing millions in revenue to New Orleans and the Gulf Coast when they convene in the Crescent City in November for the 2006 NAR Convention. NAR Regional Vice Presidents Diana Bull and David Drinkwater are quoted by CBS Marketwatch discussing the benefits of buying a home in a cooling market.
It seems that everywhere you look lately, media have been searching for signs that the real estate market is in trouble, with stories of rising inventory, price declines, and seller incentives. Many of these reports miss the forest for the trees.
Current conditions underscore the fact that real estate markets are local. The media’s focus has been on regions that experienced record price appreciation in recent years, particularly on the East and West Coasts, but many areas of the country have seen slower, albeit steady, growth, and these markets are largely unaffected.
A more balanced relationship between buyers and sellers also allows more first-time buyers to enter the real estate market, helping build wealth and strengthen communities. Historically, housing has been and continues to be a good long-term investment. Since record keeping began in 1968, the national median home price has risen every year, even during recessions and periods of sales decline. Typically, in a balanced market, home values rise at the general rate of inflation plus 1.5 percentage points.
Demographic demand also favors housing over the long term. The echo boomers (the second largest generation in U.S. history, behind their baby boomer parents) are just entering the years in which people typically buy a first home. In addition, the boomers themselves remain in peak earnings years, there is a strong immigration impact, and minority homeownership rates have been trending up.
Yes, the double-digit appreciation for home prices in some markets may not be expected in the near future, but the market foundation is strong and the sky is definitely not falling.
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