Whither the housing recovery: It’s a precarious prediction

As a homeowner, it made my heart sing (or at least hum softly) to notice four neighborhood homes not just with for sale signs on them, but with “sale pending” dangles added to the usual “must see” and ” just reduced” enticements.  Was this the beginning of the end of the housing slump?  Or had homeowners finally come to their senses, clothes-pinned their noses and re-priced their homes to a sell-able low level?

Hard to say for sure.  But several stories in national and regional media led me to believe that I was not the only one who had an inkling of change in the winds of the marketplace.  The New York Times concluded back on July 1 that housing prices had leveled off in many major cities at 2004 levels, while in some of the most bubble-prone areas (such as San Francisco), they had even backed off to 2001 price ranges.

A suggestion by the real estate writer for the Phoenix Sun that prices had held steady at a median of $115,000 every month since December 2010 was pooh-pooh’d by a handful of respondents as overly optimistic when it appeared on June 17.  Indeed, five days later, this same columnist wrote with much less certitude that “there’s also research showing the crash isn’t over.”

One of the negative indicators was the Arizona Regional Multiple Listing Service Pricing Index, which showed that the new housing market couldn’t become healthy again until the area adds 300,000 new jobs.  Without these additional jobs, median housing prices appear poised to fall to $106,000 in July and $97,000 in August.

However, there was actually more good news than bad reported in this article.  Home sales were up 3.5 percent May over April, and June was looking at least as good, if not better.  Foreclosures and pre-foreclosures were down as well — another positive.

How can one account for these disparities?  Personally, I find the type of complex industry predictions provided by the Phoenix MLS Pricing Index precarious at best, often overly conservative and well-behind the curve of real-world activities.  Shifts in the real estate market are more likely to occur at an unpredictable pace — especially in the hardest hit markets such as California and Arizona.  Signs of recovery are far more likely to be seen on the street corner before they’ll be reported through scientific indices or surveys of leading indicators.  Psychological factors such as consumer confidence, reaction to resolution (or non-resolution) of the debt ceiling issue, or other good or bad news can play a game-changing role as well.

As much value as we gain by paying attention to intelligent news sources, we may be able to learn just as much or more by walking around our neighborhoods and paying attention to what we see and hear for ourselves.  The leading edge is often right around the corner.