Oh no, could it be a real estate CRASH? The New York Times headline today announced a second consecutive month of slowing sales. What's the scoop? Sales are falling off a cliff, right? We must be nosediving into economic oblivion. It certainly sounds that way from the attention grabbing headline. You might think sales have dropped 20% or more.
November sales nationwide were off by 0.1% from the same period a year ago. How many homes is 0.1% of our national market? 10,000. In November 2004, NAR reports 6,980,000 homes were sold. In November of this year, 6,970,000 homes were sold. 0.1% (or 1/10th of 1%) is a very small decrease.
Of course, looking at sales with a lens that covers the whole country isn't particularly useful. Real Estate is a fractured, unconsolidated business. It's true that certain home builders like Toll Brothers (TOL), KB Homes (KBH), and Lennar (LEN) are 800lb Guerillas in construction and Cendent Corpration (CD) owns a smorgasbord of brokerage brands. Yet for the most part both market participants and beneficiaries of real estate are unconsolidated. This means that it's smarter to look at real estate as a large number of small markets, rather than one big market. You need to break it down by city, state, and regional statistics to get more meaningful information.
NAR's market reports does that at the grossest level and here's where it get interesting. On an seasonally adjusted basis, sales were DOWN 4.4% in the Northeast, 0.6% in the Midwest, 3.7% in the West, and UP 3.8% in the South. During the same period, median home prices INCREASED 13.2% Nationwide, 9.2% in the Northeast, 10.4% in the Midwest, 19.3% in the West, and 8.2% in the South.
Unfortunately, the way NAR looks at things in Colorado is lumped into the West with California. As anyone who follows our local real estate market knows, this isn't California. In fact, our market may even move counter cyclical to California as hinted by the RMN in yesterday's article about local real estate.
So what's happening in our market? According to the Boulder Area Realtor's Association (BARA), our area saw 308 sales in November 2005, up from 298 in November 2004. That's a 3.4% increase, year/year. FYI - BARA defines our area as Boulder, Broomfield, Erie, Lafayette, Longmont, Louisville, Superior, Mountains, and Plains. What about Boulder itself (our fair city)?
58 homes sold in Boulder in November 2004 and the same number of homes sold this November. No change. Well, is the Boulder market cooling (as a recent client insisted) or not?
In Boulder, there were 342 homes in inventory this November, with an average days to contract of 59. Last year, there were 367 homes in inventory in November, with an average days to contract of 74. This year in November, inventory was down 6.8% and average days to contract was down 20.3%. The number of sales didn't change. Short answer? No, the Boulder market (for single family homes) didn't cool in November.
What about Condo and Townhomes? November showed 10 more sales, a slight increase to inventory, and no change in days to contract.
Lesson: Watch the local trends and get local market insight before making a real estate decision. The big "national real estate" picture is not accurate for your local market.