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Explaining the Housing Market to Potential Clients, Part 1 (of 3)

NAR Home Sales Data Can Put the Market in Perspective

Note: This is the first part of a three-part series.  Part two will be posted on February 7th, 2012.

Introduction
Concerns about existing home sales, prices, and trends splashed across the national media can be overwhelming to the potential buyer. Buying a house is a big, important decision—and Realtors® have been mentioning that some buyers are reluctant to take the plunge because of all the negative publicity. Taking a tip from Dragnet’s Joe Friday, “All we want are the facts…,” NAR’s Existing Home Sales (EHS) statistics can show the facts.

  • NAR’s national numbers for the housing market can show the potential buyer the overall, summary market trends.
  • Since all real estate is local, the Realtor® can graph their local area sales and price information next to the national numbers—putting the local market into context. The objective is to give the potential buyer confidence in where the local market is headed and an understanding that the national data may be good or bad, but the local expert—the Realtor®–can help in understanding the home purchase.

This is the first of three articles discussing the use of sales, price, and inventory data. Taken together, the data at the national and local levels should provide the potential buyer an improved view of the market in order to make a realistic offer.

Home Sales—Actual and Trends
Monthly home sales fluctuate—causing the media and the potential buyer—to think of the home sales markets as uncertain or on a rollercoaster. However, a review of underlying market trends based on 6 and 12 month rolls (1) currently shows a home sales market that has been reasonably stable over the past four years. The Existing Home Sales market has fluctuated in recent years in a sales range somewhat above 4 million homes.

Home sales are strongly dependent on jobs. No one can guarantee the outlook—but the economic recovery is expected to generate additional jobs. In presenting information to a potential buyer, a graph of local sales coupled with the national information—both on a rolling basis and a month-by-month basis—puts overall sales trends and market performance in context.

On a monthly basis home sales appear to be gyrating and possibly declining.

However, considered on a four year basis—the current market for home sales as a rolling average are actually reasonably stable.

What Does This Mean To Realtors®?
The market overview based on a four year trend of sales appears to have been steady at the national level. Of course, all real estate is local. That is why a juxtaposition of local sales numbers with the national numbers can build confidence in where the market is headed—whether up or down. Both monthly and 12 month rolling data are relevant.

1. A 12 month roll is the sum of sales in the past 12 months; the roll generally will have a different value each month as one month of data is added and one month of data leaves. This makes the 12 month roll a trend line.

Jed Smith, Managing Director, Quantitative Research

Jed Smith is Managing Director, Quantitative Research with the National Association of Realtors®. He has worked on real estate issues for the past 20 years, providing input on a variety of housing, commercial real estate, tax, and planning issues. Recently he has been involved in several international studies.

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