The National Housing and Real Estate Market

The National Association of Realtors (NAR) posted an article on their web-site entitled "Pending Home Sales Index Falls Largely on Mortgage Tightening." This article discusses the index of pending sales; a pending sale is under contract but not closed.

It says that index showed that contracts signed in July fell 12.2%, and are 16.1% lower than July 2006. NAR's Walter Malony starts out his article by saying that "Pending home sales, a forward-looking indicator, shows existing -homes sales are likely to decline in coming months as mortgage disruptions work their way through the housing market, according to the National Association of Realtors." Perhaps mortgage disruptions aren't the only important factor at work here, NAR's site also shows that in July housing affordability fell (-1.24%) from the previous month. Our prices are still artificially high, and have priced a segment of the population back to renting. In addition, I think even people not involved in the real estate industry are aware that the market is in decline, and will likely continue to decline. Many are holding off any real estate purchases if they can until they see what happens to prices.

Moving on to an interesting August statistic, according to the NAR site, the consumer confidence index dropped 6.9 points in August. Face it, our economy responds to all of us collectively - and this drop is telling us we do not feel things are going to get better immediately. I find this to be a troubling indicator. Although NAR tells us that the economy is adding jobs, and "keeps chugging away".

My friend Jim Green at Raymond James and Associates has forwarded their Housing Quarterly for the 2nd quarter 2007 to me. I read every word and was alarmed at some of what they said, but also admired that they are willing to stick their necks out with their opinions. Keep in mind that they represent clients in their stock purchases and Real Estate Investment Trusts, not their individual real estate transactions. They did a brilliant statistical analysis using NAR's data, with the US Census data, and some of their own. They compare the housing crunch of the years of 1986 to 1991, and compared those statistics to the July 2005 peak to present. If you believe what they infer, we will not recover for about another 3 years. The previous 1986 to 1991 cycle ended with an ultimate decline in new home sales of -55%, and currently we have declined from the 2005 peak to 32% nationwide. Again, infer that it will fall to the -55% or more. We are falling at a more rapid pace than the 1986-1991 period.

Next: a look at the Tallahassee housing and real estate market...