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.
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.
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.
Here is a table ranking the markets we are in:
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.