Now that you see that areas or usage of the property are not broken down, it is easier to understand why statistics aren't as relevant in the real estate area as they could or should be. The stock market, another major segment of our economy, doesn't lump everything together and try to develop a trend as real estate does. The different investment vehicles are reported by category, Dow Jones 30 Industrial Average, The NASDAQ, The U.S. Treasury instruments and the mutual fund industry, to name a few types of investments. These are all compared separately and thus a trend that is accurate can be analyzed. What kind of trend could you get by analyzing the entire group as a single index? One that wouldn't be especially helpful. But that is what we have in real estate!
The analysis of the data continues. To arrive at a mean (average) price, all the sales of residential real estate in a given area are added together for the survey and divided by the total number of units sold and that is considered the mean price at that time.
This wouldn't be bad for a given tract of homes because they are usually the same size and within a range of values. Because it isn't figured by tract, the numbers are necessarily skewed every reporting period by the number of high price, medium price and low price homes that sold. More high priced homes, the higher the average; more low priced homes and the opposite happens. Writer's note: the median price of an area simply tells you that it is the price where an equal amount of homes have sold higher than that price, and lower than that price. This is useful to determine how expensive an area might be, but isn't particularly helpful in determining a trend.
With this data, people can necessarily make a mistake in timing. That is why I am particularly hesitant in making any call regarding a trend in real estate, however I intend to do so with the following caveats: check with your local Realtors and see what their analysis is of your area; realize that even if everything is heading up, that is not a guarantee that your particular property will go in that direction and an increase of job losses in your neighborhood can immediately change the trend.
I have checked the West coast and East coast particularly and find that the turn from falling to stabilization is in and the beginning of an upturn is noticeable. On the West coast, especially in Southern California and the Sacramento area, investors and first time home buyers are very active in securing the lower priced properties. The final piece of the puzzle was the million dollar homes (and upward) starting to move in Los Angeles County, Santa Barbara and Orange County, and in Scottsdale, Arizona. The Pacific Northwest, in particular the Seattle area, is doing well. Colorado, especially the Denver area which has been down since the beginning of this century, has started back.
In the East, four of the five boroughs of New York are stabilizing, all except Staten Island. Upstate New York is still waiting, however parts of New England are strengthening. The middle of the country is doing well where employment is strong, and isn't where it is weak. The biggest impetus for this turn is the confidence we are starting to see as economic data improves. Last but not least, the length of time we have had low mortgage rates and the realization that they will not last forever.
Those who can or need to begin should, and those who won't until the media has confirmed a turn will again miss the opportunity afforded by low real estate prices and low mortgage rates. The time is right and you need to decide if this is the right time for you.
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.