|  Real estate

Crystal Ball: 2010 Home Sales Will Surprise – In a Good Way

Some background:

From late summer through October 2009, Uncle Sam offered first-time buyers $8,000 if they bought a home by the end of November. As a country we “brought sales forward” – we convinced people who would otherwise have bought in December or January to buy in November.

It's Exciting!

How Sweet?

When the November numbers were released, the National Association of Realtors and the media feigned surprise that sales were so strong (up 7.4%). (“November home sales leap,” “November existing-home sales surge“).  But it was no surprise. Everyone watching the market knew it was going to happen.

Then in December, existing sales plunged 16.7%, even though the tax credit had been extended. This wasn’t a surprise to anyone watching the industry either. People who wanted to buy did so in November and by the time the extension was announced — just 34 days before it would’ve expired — nearly every person who could’ve used the credit had already made an offer. But “plunged” makes for good headlines.

Our prediction:

We have a crystal ball here at Estately: Home search traffic.

See, before prospective homebuyers apply for mortgages, or choose agents, or go to open houses, they dip their toes in the market by searching for homes on our site. When our traffic spikes, we see spikes in home buying a few months later. And we finally have some good news to report!

2010 will start slow–January sales will be off. (Estately’s partner agents helped a lot of people buy homes this January – many more so than last year – but we’re fairly certain that has more to do with us than the market.)

Sales will be low because people who would have put in an offer that would close this winter already did so in the fall — they wanted that $8,000. (Note: that means less competition if you are buying a home right now.) We also expect low sales for January because we saw soft traffic in November/December.

Spring and summer of 2010 will be different! Every year, there is an annual increase in people searching for real estate from December to January. But this year we are seeing a much bigger bump – 80% bigger.  This year we are seeing 40% more people searching for homes on Estately in January than we were in December. That’s a huge change in homebuyer sentiment.

Home search traffic is a leading indicator: we saw traffic really jump last August – three months before sales jumped in November.  Based on previous annual trends, this dramatically increased interest and traffic will translate to strong home sales this spring and summer.

Regionally, the Big Winners are Chicago, Atlanta, San Diego and Seattle with huge bumps. The rest of California – and especially Sacramento - not so great.

Here is a table ranking the markets we are in:

City Seasonal Bump

Chicago 64%

Atlanta 57%

San Diego 55%

Seattle 55%

Portland 47%

Bay Area 25%

Los Angeles 23%

Long Island 21%

Sacramento 15%
.
Rank City Seasonal Bump
.
1 Chicago 64%
.
2 Atlanta 57%
.
3 San Diego 55%
.
4 Seattle 55%
.
5 Portland 47%
.
6 Bay Area 25%
.
7 Los Angeles 23%
.
8 Long Island 21%
.
9 Sacramento 15%
.

Disclaimer: This is a short-term prediction. I’ve personally been a pessimist about the real estate market since 2004. But back then I jumped the gun, since the market continued to rise for 2 years. And I didn’t quite expect the magnitude of the 2006 correction, either (what a ride!).  Whatever happens in 2010, long term, I believe we’re in a holding pattern for stocks and home prices – there will be upward swings and downward swings. The Case Schiller index seems to show way less room for prices to go down than it did at the peak of the bubble and thankfully homebuilders have virtually stopped building. Mid- to Long-term home prices and sales are stabilizing.

And a nod to the contrary evidence out there is warranted: While Google Trends seem to contradict me (see Seattle Bubble for analysis), I’m skeptical of Google Trends as a measurement tool here – buzz about real estate, home prices, and mortgages can cause “real estate” searches, but browsing homes on an MLS-based search site like Estately means business.

  • http://LiveLakeForest.com Vicki Lloyd

    The first time buyer credit was (and still is) $8,000. The repeat buyer credit is $6,500. Both of these are good until 4/30/2010 to get a contract accepted, and it must close by 6/30/2010.

    I think we will have a big surge of sales from now through late April, then a very serious lull.

    Sales are slow right now because there aren’t many homes available to buy. Sellers need to get on the market NOW to be ready for those buyers!

  • http://www.shackprices.com/ Galen

    Vicki, thanks for pointing out that typo – fixed accordingly. Obviously we didn’t get into the ins and outs of the tax credit rules.

    I also agree there will be a lull in May and June. The time to list your house is now.

    Regardless of the extension, people are interested in finding a house right now. The false sunset of the credit in November didn’t make everyone buy.

  • http://Rachnahomes.com Rachna Eav

    I agree with your prediction. Last year this time was definitely slower and this quarter already has proven to be super busy for me. I believe that we will have a better real estate season than last year.
    The inventory out there is definitely lacking- I just sold a home in 2 days for full price and closed in 3 weeks. I am also representing a lot of buyers out there who just can’t seem to find what they are looking for. I would recommend that anyone who needs to sell a home-list it now while the inventory is low.

  • http://www.ninebyblue.com Vanessa Fox

    Depends on what you’re searching on in Google Trends. I don’t know that people searching for “real estate” are necessarily buyers (as you point out), but searchers looking for “homes for sale in” may be more likely to be:
    http://www.google.com/trends?q=homes+for+sale+in&ctab=0&geo=us&geor=all&date=all&sort=0

  • http://www.shackprices.com/ Galen

    Great observation – home buying interest appears to be significantly in the black this year on that chart.

  • http://www.homesforsaleinsandiego.com Myles Weisman

    I agree with your predictions about the up and coming economic bump. Homes in San Diego I feel with start to take a turn for the better it is just going to take time. San Diego is such a large market like multiple areas of California that it make take more time than anyone can anticipate for trends to start to rise again. What I have noticed in google trends is as I have seen in previous comments. It is turning more into a market full of buyers and very few sellers.

  • davidfox01

    .. yes i agree with you say vicki, the sellers need to get in the market now to be ready with those buyers..!! its really true!!!

  • johnhunt10

    i agree

  • kymaromortenson

    I think home sales will absolutely surprise some. I believe that the worst is behind us. The unemployment rate is going down drastically and i look forward to a summer rebound in new home construction as well as sales. Let's all breathe a sigh of relief.

    Kymaro

  • http://www.flsounds.wordpress.com fl studio

    I am trying to get into a condo before june 30th so i can get my first time buyers credit, its a good opportunity, it sucks that it is so soon though, its really pushing it…

  • marianna

    There are still lending to people who cannot repay!

  • http://www.simonaheather.com buytorontocondo

    Sometimes the increase in web traffic for a locale and is real state can be misleading. Here in metropolitan Toronto, we have an HST tax coming in to play in 6 weeks. Web traffic has been insane as people panic trying to figure out what it means for them. Also, the rumour is that rates are going up soon too, so there is an abnormal amount of action going on right now as people try to avoid the supposed rate increase, and the phantom HST (it only applies to new construction, not resales). So, it maybe that an increase in web traffic is extraneous data with a logical explanation! ; )

  • http://www.simonaheather.com buytorontocondo

    Sometimes the increase in web traffic for a locale and is real state can be misleading. Here in metropolitan Toronto, we have an HST tax coming in to play in 6 weeks. Web traffic has been insane as people panic trying to figure out what it means for them. Also, the rumour is that rates are going up soon too, so there is an abnormal amount of action going on right now as people try to avoid the supposed rate increase, and the phantom HST (it only applies to new construction, not resales). So, it maybe that an increase in web traffic is extraneous data with a logical explanation! ; )

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  • http://www.cancasa.com Cancasa

    Looks like things are taking a turn for the worse in your neck of the woods.
    House price inflation was always going to be unsustainable.
    Artificially low interest rates didn't help either.

  • http://www.tenantfile.com Property Management Software

    I am not sure that the government won't be doing anything to increase the sales in the real estate…As in the last quarter as well it gave more benefit to the buyers giving relaxation in various taxes and I am sure that this quarter will also see more sales and bigger benefits to everyone… :)

  • http://tenerifeestateagents.net Tenerife-Property

    Any chance of an update to this post? How on the ball were your predictions in the end?
    I think where we are based prices will fall further as they come under more pressure from bank repossessions. Rising interest rates wont help mortgage holders either – no recovery on the horizon that I see yet.

  • http://www.5k.lt MsDaisy

    I agree with Galen, really interesting article. Thanks!

  • http://www.cancasa.com Cancasa

    The US is ahead of the curve and I think the drop in prices is the market forces correcting the inflated prices of the last decade.The market their will shortly reach a bottom and sales will resume once the lenders and borrowers are confident that prices have bottomed. .
    Europe is about 2 years behind the US judging by the prices their but once interest rates are forced to rise to combat inflationary pressures,it will be a race to the bottom and as is always the case,prices will overshoot projected drops and the trough will be around for some time to come.

  • http://www.auto-rent.ro Rent a Car

    I agree with your prediction. Last year this time was definitely slower and this quarter already has proven to be super busy for me. I believe that we will have a better real estate season than last year.