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House Sales Improved in June, But is the Housing Crisis Over?

This article was written by in Real Estate and Home. 16 comments.


“Now is a great time to buy.” That has been the advertising mantra of the National Association of Realtors regardless of the state of the housing market. The NAR certainly has a purpose; its mission and vision is clearly displayed on the organization’s website: “The core purpose of the NATIONAL ASSOCIATION OF REALTORS® is to help its members become more profitable and successful.”

The NAR looks out for its due-paying members. Notice that the mission of this non-profit organization is not to help consumers either find bargains when buying a house or to help sellers find the highest bidders. Real estate brokers, particularly those who qualify as Realtors (which according to the organization, should be represented in all uppercase letters, include the registered trademark symbol, and be pronounced in the unnatural American English combination of phonemes “REAL-TORE”) stand to be more “profitable and successful” by increasing the number of transactions they broker.

From what I understand about commissions, a 6% commission is often split between the buying agent and the selling agent, and if the agent is part of a realty company, the 3% is split with the company. A real estate agent holding out for a buyer’s asking price of $250,000 rather than $220,000, a difference of $30,000, stands to increase his income approximately $450. That seems hardly worthwhile if it takes several months before the asking price is met. The $450 is hardly an incentive for the broker; he could do better by closing the deal and moving on. On the other hand, the $28,200 (the $30,000 in price difference minus the 6% paid to the agents) is a significant difference for the seller. This just illustrates that real estate agents have little incentive to work hard for either the seller or the buyer except to create a good relationship in order to foster referrals.

That’s not the point. The point is that the National Association of Realtors’s only goal is to encourage more real estate transactions, and this is why they have been saying that, “Now is a great time to buy,” no matter what’s going on in the world around them. This is also why any data provided to the public by the NAR should be regarded as marketing rather than a true gauge of the economy.

For a well-accepted measure, media generally turn toward the Case-Shiller Price Index (CSPI), measured by Standard & Poors (a company with its own conflicts of interest as well). The CSPI shows that home prices increased for the first time in May. Other positive data include June numbers: new housing starts and existing home sales were both up 3.6% and sales of new homes were up 11%.

Is this a sign that the housing crisis is over? It must mean that there is increased confidence in the ability to find the right price as well as increased availability of loans.

There are some problems, though. Unemployment continues to rise, so consumers may find themselves in financial trouble. That could result in fewer purchases and more mortgage defaults. The increase in purchases may be due to speculators trying to snag deals rather than families moving from apartments to houses. Even if we are at a bottom, the numbers could mean that real estate is leveling without significant increase for some time.

What do you think? Are we headed for a recovery or are there still dark clouds ahead?

Looking for a Housing Recovery, Casey B. Mulligan, New York Times, July 29, 2009.

Published or updated July 30, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 8 comments… read them below or add one }

avatar MyJourney

Flexo,

“The $450 is hardly an incentive for the broker; he could do better by closing the deal and moving on. On the other hand, the $28,200 (the $30,000 in price difference minus the 6% paid to the agents) is a significant difference for the seller. ”

This is literally the basis for chapter 2 of Freakonomics – “Chapter 2: How Is the Ku Klux Klan Like a Group of Real-Estate Agents?” If you haven’t read the book PLEASE LET ME KNOW AND I’LL Happily lend you mine

Personally, I do not think we are out of the woods just yet, and it makes me crazy when the NAR makes statements and the journalist who quotes them doesn’t qualify the quote like you did.

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avatar chester moon

I think its at best a false bottom. The moratoriums as well as some banks holding onto inventory, have reduced the supply of houses on the market vs real supply. This has caused more competition for good homes in selective markets. Once the home buyers credit expires I expect there to be another drop in demand, with increased supply. The job market while forecasted to be better next year will still be crappy. for there to be real demand the house prices would have to increase enough for people to regain enough equity to consider swapping houses. I just don’t see that any time soon. Though I think the financial side of this has been resolved, it will be years before we clear up this inventory get back to a normal market.

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avatar Rick Casey

NPR mentioned today that issued foreclosures has gone up to record numbers last month as a new round of foreclosures is beginning due to unemployment rather than rising interest rates.

Is it time to refer to these graphs again?
http://activerain.com/blogsview/202178/adjustable-rate-mortgage-reset-schedule-graph-
http://www.thetruthaboutmortgage.com/interest-rate-reset-chart/
http://healdsburgbubble.blogspot.com/2009/05/reset-chart-from-credit-suisse-has.html

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avatar Matt Jabs

We will always have to deal with bias in statistical and news delivery. The only thing we can do as individuals is to educate ourselves and be slow to move on all things.

Thank you for reminding me to of these truths… it encourages me and reminds me that my own solutions are the best solutions.

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avatar Eden

I think the part of the housing crisis that caused it in the first place is finally behind us (insane credit and bubble prices). However, there are still many foreclosed homes just in my small neighborhood and myself and many people I know are break even at best or underwater on our homes. We could be bottoming, but I think it’s safe to say we are a long way from rebounding or even a return to ‘normal’. Do we even know what normal is anymore?

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avatar frank

You can view my thoughts on the housing market in general here, although it is a bit dated :)

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avatar Matt SF

The NAR is nothing but a trade organization out for their own best interests. While this isn’t a crime, it should imply that anyone using their services should take whatever they say with a grain of salt.

As far as market bottoms, it really depends on where you are looking to invest. Many areas didn’t even experience a housing boom, so the bust effect has been limited or gone unnoticed.

From the recent data I’ve seen, I think a small percentage of investors will come in and begin buying lightly throughout the bottoming process of the hardest hit markets (Miami, southern Cali, Las Vegas, etc), but I think we’ll trade on a slight downgrade to flatline for the next year or two.

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avatar Akemi

What I am seeing now, is a low inventory of REO homes. Are banks holding on properties? Once you find a good one, there are multiple offers sent, and of course, it gets sold way above listing price.

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