For those not yet indoctrinated in all-things Stat Pack…
This month I enjoyed another laugh at the “wisdom of crowds / conventional wisdom folks” by saying that:
The informed consumer should read Bloomberg,, MSNBC, Fox News, The Wall Street Journal, Case- Shiller, The Gazette, The Denver Post and whatever else big media wants to throw out there about how horrible the economy is doing, how poor the job creation is, how volatile import/export balance sheets are, and what the Fed Policy decisions will do to the dollar against foreign currencies.
They should do that: as long as they temper that with simple observations, like a glance at what is going on in local pricing. Pricing has been marching unmistakably all year to a place of balance.
What color is the sky?
Both of these questions have obvious answers. The sky is still blue, and price is climbing.
In the world of data-crunching, it’s important to stick to data and not to headlines. In the world of data-crunching, there is excess hyperbole. In the world of data-crunching, nothing sells quite like fear.
Buyers and sellers like to say right now that prices are coming down.
Sellers see their neighbors coming down in price.
So why are sold prices going… UP?
Here is a quote about the Pikes Peak Market from the October 2010 Stat Pack (You can link to the November Stat Pack – posted today – RIGHT HERE).
Sellers are so frustrated that they are quitting the market, so prices logically are going… up? How is that possible? The reason is that the buyers who see this as an opportunity are often ones who focus on their interest savings, interest that won’t change for 15 to 30 years. At 4.375% – the going-rate on a 30-year mortgage – every $1000 increase in price represents a mere $5 a month in payment to a buyer. So a buyer who increases their search by $20,000 only ends up paying $100 a month more (or $1200 a year) for a home that is probably significantly “more” in every way. With the low taxes of the Pikes Peak Region, a $200,000 30-year fixed mortgage usually has less than a $1200 monthly payment, even with taxes and insurance escrows.
The hidden story here is that buyers end up reaching, and what they end up buying are homes that previously were considerably more expensive. Take a home in N/E, where the average time to sell was around 100 days last month at and average price of $234,000. The buyer of that home might have capped initially at $220,000, not found what they were looking for, and stretched in price to $240,000. There, they found a home that initially started at $259,000, reduced to $250,000, then $245,000, before finally getting to the right price at $239,900. With a 97.3% price differential (the sold price divided by the final asking price), they were able to settle at a very-near-all-market-average price of $234,000. The data on the story is really this: the buyer came up $14,000 and the seller came down $26,000; the headline is that prices are going up. Here, reality and headlines are not really the same thing.
Don’t buy the headlines. Don’t buy the hysteria. Unpack the data. Look for simple answers. Watch for trends. That’s the Stat Pack.