Login or signup
36
MONEY

The Real Reason Housing Looks Better
 

Today's pending sales numbers appear to be strong, but only in comparison to 2011, the worst year for home sales in half a century.

Advertisement

You could be forgiven for thinking the housing industry is finally rebounding. Today we heard January pending home re-sales were up by a better-than-expected 2 percent and up 8 percent over the same time last year. Last week we got the news that the sale of existing homes rose 4.3 percent in January, the third increase in the last four months. Lost in all these numbers are a few facts that suggest it isn’t yet time to break out the bubbly.

The National Association of Realtors index of pending home resales climbed 2 percent last month. This followed the sort-of-good news about December sales: A 1.9 percent decrease that was smaller than had been expected. It’s worth remembering that these numbers are based on contracts being signed – not closed. On Friday the Census Bureau announced the sort of good news that new home sales were up 3.5 percent over January 2011. Unfortunately they were also down 0.9 percent from the month before.

Keep in mind that 2011 was the worst year for new home sales since the Census Bureau started tracking sales in 1963. The second and third worst years were 2010 and 2009 – that’s not a record we want to keep breakd.

Additionally the January housing numbers came despite several things which usually bring buyers in droves: Warm winter weather, historically low mortgage rates and low prices. Even so prices continue to fall. Those low mortgage rates can be thought of as another stimulus that isn’t working.

It’s also important to note that most buyers today are either first-time buyers or investors. Move-up buyers aren’t participating because they don’t have enough equity in their current home to sell and buy a move up. Only when that happens will the housing market actually have recovered.

The shadow inventory still isn’t reflected in the total inventory numbers. Lots of people and banks are keeping houses off the market in the hope that prices will improve. That can’t go on forever, especially because banks have just re-started foreclosure efforts and are about to have a lot more homes on their books.

Last updated: Feb 27, 2012

CONSTANTINE VON HOFFMAN is a writer and sometime standup comedian. His work has appeared in Harvard Business Review, NPR, Sierra magazine, Brandweek, CIO, The Boston Herald, TheStreet.com, and Boston Magazine.
@CurseYouKhan




Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Comment and share features
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: