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Jim Gramata's Blog

By Jim Gramata | Broker in 60614

Home Sales Reports a MOM would love!

March 21, 2011 – “Home sales fell in February following three straight monthly increases, according to the National Association of REALTORS®.”

March 28, 2011 – “Home sales increased in February but with notable regional variations, according to the National Association of Realtors®.”

Source: National Association of Realtors (NAR)

It is on everyone’s mind. What is the current state of today’s residential real estate market?  Where the residential real estate market is going? 

Where can I find a reliable information source for the real story on where the market trends are heading?

That is the problem! 

The information is at best confusing and at times contradictory, even from what most would consider highly reliable sources. Like so many things, while the source of information is of course a major factor, in this example even the same source is printing contradictory information.

In addition to where the source of the information, we have to focus on what data is being analyzed and reported on. Most reports offer slivers of relative information and if taken alone can be interpreted as doom. In the above scenario the two reports are accurate and from the same source, however when you dig deeper into the reports you would realize that one is based on year over year comparisons (YOY) and the other a month over month (MOM) report. 

I think MOM is a more relevant source for interpreting where our current residential real estate market has been and where it is heading. After all, mom knows best. 

Most of the recent negative doomsday headlines are based on the YOY real estate statistics. These numbers are brutal but remember last April was the most active months in recent years because of the Federal Homebuyer Tax Credit incentives. It was the best two quarters of sales volume ever in my offices history. Ever! (that includes the  2006 peak period). 

Many buyers moved their summer or fall buying plans up to take advantage of the incentive. Who wouldn’t? (Well, those buying now I guess). Time and time again we see the number of units sold through the roof during the first and second quarter of 2010. Ergo, comparing this year to last year (YOY) will create the doom and despair articles we are seeing across the country and in the Chicago area. 

A better way to judge the market at this time is to compare month-over-month sales. Here is a graph showing the increase in pending sales over the last twelve months.

As we can see, sales dropped dramatically after the expiration of the tax credit in April 2010. So comparing Last year to this year (YOY) makes no sense. MOM tells a more accurate story of where residential real estate pending sales are trending. Sales are beginning to slowly rebuild and increase without any government incentives and under normal market forces.(Source: Keeping Current Matters, 3/2011).

So what is the bottom line? In this exact moment in time we need to focus on MOM data, although my mom would argue we always need to focus on mom because mom knows best. 

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