A little clarity on the new home sales "crisis"
It's the worst market since 1980. That's right. You heard it everywhere this week. New home sales have fallen more steeply than they have in about 30 years. We're back to Jimmy Carter-ville! Next thing you know, Miss Lillian will be rising from the grave.
Welcome to the wonderful world of misleading statistics.
It's true that the percentage decline in new home sales is as sharp as it's been in 30 years. But that doesn't mean total sales have returned to levels unseen since 1980.
Skeptical of the alarming headlines, I pulled historical new home sales data for the Tampa Bay area going back almost 40 years.
Guess what? In Pasco County, new home permits, sort of a leading indicator since builders pull permits before they break ground, returned in 2007 to 1997 levels. The hard number is about 2,220 permits.
In Hillsborough County, the story was much the same. Hillsborough issued 4,665 permits for single family homes in 2007. That approximated the levels of 1995.
Only in Pinellas County did the permit total fall to levels not seen in 30 years. But the "crisis" there is largely one of land scarcity.
As Florida's most densely populated county, Pinellas has suffered a slow long-term decline in housing permitting going all the way back to the house and condo construction boom of the early 70s.
Pinellas home construction has zigged and zagged over the years, but the general thrust is downward.
Conclusion: Beware of the numbers/percentage game. It makes for alarming headlines, but it's only half the story.
We were sitting atop Mount Everest in 2005. Just because we've fallen off that summit, doesn't mean we're residing in Death Valley.
(Un)Real Estate offers a peek at the housing market usually reserved for insiders. While it focuses on the Tampa Bay area, it won't neglect dipping
into the rest of Florida and beyond. Its goal? Simple: To help you keep a roof over your head without losing your shirt.
So builders are still building much more than they're selling. That's not good news. Moody's said one cause of the current glut is that Tampa Bay builders were too optimistic and built too much.
When you're in a hole, stop digging.
Posted by: Mariella | January 20, 2008 at 11:05 AM
It is simple economics - supply and demand... Over supply by builders = low demand
Posted by: Rachel Sartain | January 20, 2008 at 08:45 PM
Unfortunately, I don't remember who was the famous politician quoted as saying that 'I only believe in statistics, which were altered personally by me'. Alarming headlines, however, would not only be caused by misinterpreted stats. Many journalists can't help creating bombastic headlines if they can't come up with an interesting story.
Posted by: Toronto real estate agents | January 21, 2008 at 04:12 AM
Statistics are just numbers. You can interpret and report them any way you want. I could tell you the median home price has decreased 29% from June 2005 to Dec 2007 in Pinellas County. Or I could report that home sales in Pinellas County were up 8.9% November to December. Both are true but both sides are not always reported. If you want to see the real numbers get the statistics. www.RachelSartain.com
James always has overly dramatic headlines but his column is typically a great balanced view of real estate.
Posted by: Rachel Sartain | January 21, 2008 at 06:31 AM
I agree that builders overdid construction from 2004-07 and that the "slump" now is a necessary, though painful, purging. One big reason I went with my builder in 2006 was that they hadn't swallowed the Kool-Aid as much as other builders in selling to so-called investors. Investors (gamblers is the correct term in most cases)slipped through, but my builder wasn't actively marketing to them. I was startled when visiting a sales center for another builder that EVERYONE in line but me was a speculator. Builders are human and it's human to grab an easy sale, whether the buyer be an investor or not. But they shouldn't whine today that buyers have vanished. They took the fast pay-out in 2005 and now have to live in relative poverty. Honest builders will tell you that.
Posted by: James Thorner | January 21, 2008 at 10:49 AM
It is simple economics - supply and demand... Over supply by builders = low demand
You forgot to add in one other aspect, Over priced homes = No Sale!
Posted by: Fuzzy Bear | January 21, 2008 at 01:19 PM
Hey Rachel nice plug for your real estate web site. However the prices still look to high.
Posted by: Dave | January 21, 2008 at 10:42 PM
Hey Rachel nice plug for your real estate web site. However the prices still look to high.
Posted by: Dave | January 21, 2008 at 10:45 PM
Realtors getting sued. Just the start of many.
http://www.nytimes.com/2008/01/22/business/22agent.html?_r=1&hp&oref=slogin
Posted by: david | January 22, 2008 at 12:43 AM