On the House: Real estate may be all local, but it's not isolated

Posted: January 22, 2012

In early January, Dean Baker of the Center for Economic and Policy Research blogged that 40,000 of the 200,000 jobs created in December were courier jobs that would disappear in the next month's report.

In other words, temporary positions related to the holidays - the ghosts of Christmas just passed.

"Arrrgh," Baker tweeted later. "If only economists had to know economics!"

Some economists do know economics, but I assume that the overwhelming volume of data they must consume every day can lead to chronic indigestion, or at least lapses in judgment.

If you look at the data for nonfarm employment over time, even an occasional viewer can see the seasonal peaks and valleys, and one would think every economist would tell the jubilant feds, "Hey, wait a minute. . . ."

Let's quickly turn to real estate, because jobs and houses are codependent.

Just before Christmas, the National Association of Realtors acknowledged that outdated methodology had caused it to overestimate sales of previously owned homes for about four years.

Independent data-crunchers had long assumed that the numbers were too high, by 20 percent by one estimate. When the Realtors "rebenchmarked" (yes, I know), they were 14.3 percent too generous for 2007, 2008, and 2009, and 14.6 percent more than reality for 2010.

If you are someone who deals in half-empty glasses, that means the real estate downturn was even worse than we had imagined.

But the Realtors group's chief economist, Lawrence Yun, offered the half-full glass that saved the day.

"From a consumer's perspective, only the local market information matters, and there are no changes to local multiple-listing-service data or local supply-and-demand balance, or to local home prices," Yun said.

In response, I amused at least two of my followers by tweeting: "If all real estate is local, why do we need the NAR? Just asking."

The answer is that real estate agents and brokers need the association to push housing's agenda in Washington as much as builders need their national organizations. Politicians pay greater attention to groups with lots of members who dress nicely and finance political action committees than they do to anyone else.

Sales numbers are another matter. Real estate has been, is, and always will be local: from street to block to neighborhood to town and city, and even to region.

Is that saying that we don't have to report the national numbers? No. We'd be accused of suppressing the news.

We make a conscious effort to offer local numbers, as well, from trustworthy sources when we have them, so you can compare and make your own decision.

Are we affected by what is happening to real estate elsewhere in the country?

Of course we are.

The fact that you have to jump through hoops to get a mortgage or to refinance has less to do with you and your house or neighborhood than it does with Nevada, Arizona, Florida, California, and all the other foreclosure pools.

Everyone is being made to suffer because the banks have been taking a bath in those pools every day for the last five or six years.

Although this region has been affected less by the foreclosure crisis, it matters little. When monthly sales in other areas are higher than ours are, it's because the high volume of foreclosures makes prices there lower. It's less our fault than theirs, but we suffer because of them.

So, to a point, real estate is local, and we should focus on the things we can change as we wait for the economy as a whole to improve - all year, every year, rather than just around the holidays.


On the House:

Inquirer real estate writer Alan J. Heavens' home improvement column appears Fridays in Home & Design. See instructional videos at Al's Place. Go to philly.com/yourplace


"On the House" appears Sundays. Contact Alan J. Heavens at 215-854-2472, aheavens@phillynews.com, or @alheavens on Twitter.

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