Real Estate’s Bouncing Ball

Every so often a new report is released that measures the state of the housing market based on the average price of homes sold nationwide.  Then they chart that number to see if it’s gone up or down over the last time they looked (monthly or quarterly).  The media loves to headline the result with a lot of drama – particularly if the number goes down – and then provide dire predictions from economists or other analysts. 

One of the most important rules about real estate is that it is LOCAL  The thing to keep in mind is that the numbers they measure are averages nationwide that may or may not reflect the trend in your region.  For example, nationwide there was a pretty big drop in home prices over the last few years, yet some areas were barely effected and others ended up completely under water.  Interestingly, the first markets to crash are now the earliest ones to show signs of a solid recovery (northern Virginia for example).

A housing market like none other in history is hard to predict because so many factors come into play.  Think of the last few years as a large ball that was dropped from up high.  The first bounces are big and then they get smaller and smaller until the ball eventually stops and rolls along the ground.  This is what the housing market is doing.  We are past the steep price drops and are now seeing the smaller peaks.  Eventually everything will calm down (if someone thinks they know when that will be, ask them where they got their crystal ball).  A “normal” market is balanced and overall realizes a modest yearly increase in home prices.

Image via Wikipedia

Ball goes up – NAR released stats showing resale home prices have gone up 7.8% in April 2010.

Ball goes down – Prices fell 0.5 percent in March from February, according to the Standard & Poor’s/Case-Shiller 20-city index released Tuesday, May 25, 2010.

Regional Maryland statistics for Howard, Baltimore, Anne Arundel and Carroll Counties show that these markets are up over the same time last year.  The number of homes for sale and the numbers of homes sold indicate that these markets are balanced - neither a buyer’s nor a seller’s market.