We all see the real estate and economic headlines in our local and national news, but to say the headlines represent any kind of consensus would be absurd. Just in the past couple weeks Newsweek declared the recession over while Bloomberg declared the recession even worse than previous estimates. And while these very recent examples are in reference to the national picture, local real estate and economic headlines for the Pikes Peak region are just as varied.
So why the disparity? You’ve been told since you were in grade school that the numbers never lie, right? True enough, the numbers don’t lie because they are just that, numbers – raw data that has to be interpreted to have any meaning. Anyone with an agenda, vested interest, prior conclusions, or who is just having a bad (or great) day can warp the data to present a disingenuous picture.
To illustrate, I’ve prepared a few mock headlines and lead paragraphs pertaining to the Colorado Springs real estate market, and even inserted some charts to support them. All of these are 100% true and could have been legitimate stories in the past couple months, but they all paint very different pictures. My intent here is not to draw any conclusions without providing you addition information and proper context. While technically true, what follows does NOT represent my opinion.
My intent is simple, to point out how easy it is to make the numbers say whatever you want them to say, and encourage you to take a closer look next time you see a news article about the state of the real estate market.
Skyrocketing Unemployment More than Doubles over past 24 months!
Perhaps one of the most ominous signs for the Colorado Springs economy is near record unemployment. Economists will tell you that this is one of the most important indicators for the economy and we’ve now seen the rate more than double in the last 2 years. (May 2007 to May 2009)
Sounds terrible, but what if we report the exact same data this way…
Unemployment Rebounds; Leaves National Numbers in the Dust
While unemployment has been going up during the past couple years, there are signs that this is reversing, at least in Colorado Springs. While Colorado Springs has seen significant improvement over the past 2 months, the national numbers are still escalating. The local unemployment rate tends to track closely with the national only rarely registering more that a half percent more or less when they are compared. In fact, the March rates were identical. But now? The local unemployment rate is lower than the national rate by 1.7% – in terms of unemployment that is a very significant spread.
Median Home Prices are Accelerating Downward
So you’ve seen the news that home prices are declining, but did you know the decline is actually accelerating? When using year over year statistics, we can see that the trend is that prices are falling faster.
We don’t have time to analyze the flaws in the above logic, but it is technically completely true. Here is another way to look at the exact same median price indicator. I’ve used the same raw data to show the opposite extreme. (In this case, I believe reality exists somewhere between these two pictures.)
Median Home Prices Jump $20,000 in first half of 2009
Are you waiting to buy at the bottom of the real estate market? If you live in Colorado Springs that chance is gone; Prices have already rebounded $22,000 since their low in January 2009 according to the median price for single family homes in the Pikes Peak region.
Month Supply back at equilibrium – lowest in 3 years
One of the most important indicators in any housing market is “months supply” which allows us to see the relationship between supply and demand. As of June, we’re in unfamiliar territory here in Colorado Springs – month supply is at the lowest level in 3 years! Most experts would consider 5-6 months supply a good measure of equilibrium in a market; we’re at 5.9.
This is a fair picture of the market at large, but what if you chose to only evaluate a segment of the market using the same criteria? What follows could have been extrapolated from the same data!
Luxury Home Market Could Take Another Decade to Recover
The news in the luxury homes market just seems to keep getting worse. June ended with 28 month supply for homes over $500,000; that’s almost 2.5 years. Once you pass the million dollar threshold the situation only gets worse – the sample sizes aren’t large enough to get to specific, but it’s safe to say that there is OVER 5 YEARS supply. Once you factor in homes yet to come on the market, it could be years, maybe even a decade, before demand catches back up with the supply of these high end homes.
Talk about a difference in perspective…
So next time you read a headline about the housing market plunging deeper (or recovering) take a minute to evaluate what is really being reported. There are two sides to most statistics, and a cursory review in a news article rarely paints the whole picture.