Sales up 69% during November. Is it to be believed? The numbers have been checked twice and it has been confirmed. But what does it mean? Is this the end of the slump? Have we broken the trend? Shall we brush up on our karaoke version of “Let The Good Times Roll? Not so fast.
After a few years of month upon month of same month declining sales we have now had two positive months. But before we get too excited we should answer the ever present question “why”. The way I see it there are three main reasons why we have seen strong sales over the past few months. Those three reasons are: Stimulus, Confidence and Comparison. I will tackle them in order.
The stimulus plan, more specifically the homebuyer tax credit, has been around since the first quarter of 2009 but this was an easy one to procrastinate on. The original deadline before it was extended in early November was November 30th. As we got closer and closer to that deadline more and more first timers were racing the clock in order to take advantage of once in a lifetime money. Many argued that these people were going to buy a house anyway but the credit and the deadline that went along with it condensed the sales. The argument was that we were borrowing next year’s sales now. Now that the tax credit has been extended and expanded we might just see a new round of stimulated sales ending in April.
After more than a year of gloom and doom we are starting to see some signs that we are coming out of what has been dubbed “The Great Recession”. Many sectors seem to be recovering however; housing is not on the short list. In Boulder County the recession took its toll but it certainly was not as deep and painful as many other areas. Unemployment in the county is currently in the 6’s while nationally it is around 10%. Jobs drive homeownership. There are many reasons why people move but most of those reasons can be put off if all is not quiet on the job front. If the vast majority of people are still employed what caused our sales to drop more than 50% over the past few years? Much of the difference can be attributed to confidence. When your company is laying off and you could be next you don’t buy a house. When your salary has been cut 10% you lose the drive to take on a new mortgage. When you see your neighbor lose their house to foreclosure you tend to hold on to what you already have. In a word consumer confidence has taken a big blow and we are just now starting to see some of those people who have been putting off those buying decisions come out of the woodwork. As the economy becomes brighter, more and more will feel that it is safe to make a decision.
I’m a sports fan and after many years of watching our local teams one thing has become very clear. For a mediocre team (and we have seen our fair share lately), results are directly tied to the quality of the competition. If the Buffs are playing the College of the Grand Prairie State we tend to look pretty darn good and when we play say, Texas we tend to look like a high school team. And so it is with statistics. For 27 months in row our sales figures were lower when compared to the year before. At some point what you’re comparing to is so bad that anything looks decent. Remember a year ago, November sales were hamstrung by the economic backwash that was causing banks to fail, companies to go bankrupt and mortgages to disappear. So while it is great for sales to be up 69% it is sort of like the Buffaloes beating Fairview High School 77-0 in a game. Good news but not all that impressive.
Last month the Boulder Daily Camera declared that home values had fallen for the first time in 25 years and that the average homeowner in Boulder had lost $40,000. This is another reason why you can’t believe everything that you read. Yes, median prices have gone down. According to FHFA.gov median prices had fallen .56% from 3rd quarter 2008 to 3rdquarter 2009. IRES statistics show a decrease of 3% in the county through the end of November. But $40,000? Where did that come from? Each month BARA reports the median prices of the homes that sell in each locale during that particular month. During October the median sales price of homes in Boulder happen to be $40,000 lower than October of 2008. It is not scientific, it proves nothing and the sample size was just 36 homes sold.
It will be an interesting year ahead. I expect a quick start and am hoping that consumer confidence and jobs begin to surge just as the stimulus expires.