Are You Making Housing Decisions From Headline News?

I always keep articles on South Bay/Beach Cities housing and about once a month I go through and review the ones to keep and the ones to toss. My favorite scare articles are from the gentleman who used to be with the Anderson School of Economics at UCLA but is now on his own. He has been predicting a 30% drop in home prices since 2000 and has been wrong every year. But he never gives up.
Looking at the headlines for the last four months about housing is really depressing. However I have noticed that the bodies of the articles and the headline are often at odds. This made me wonder how many people make their housing decisions based on the headlines instead of the articles. We are a nation addicted to the quick. A vast number of us get our news from headlines on our home page or CNN. Articles take time to read; we need the condensed version.

In the Daily Breeze Business section yesterday the headline in red bold point type is: 31.7% Biggest Drop in CA home Sales 24 years. What you don't find until the second paragraph is that the drop is from September of 2005. Not mentioned is that home sales in 2005 were the highest ever recorded. Also down in the body is that "Unsold inventory is holding steady and is close to the long- term historic average of a normal market". So why isn't the headline Market Reaching Historic Average?

Today's article is Home Price Fall Sharpest in 35 Years. What you don't get until the third paragraph is that this number( 9.7%) is for Nationwide sales of new construction. Half way through the article you find that overall prices are down by only 2.5% and sales activity is up for the last two months. You won't see a headline that says Prices Drop 2.7% Sales on Rise.

The LA Times is usually worse. Although last week they actually ran a positive California housing story. Someone had to have made an error and has no doubt been fired!

If I were a Buyer or Seller reading all the headlines I'd be terrified of this market. Buyers are worried that if they buy the price will drop and they will look silly for buying in a down market. Sellers are concerned that if they sell now prices will go back up and they will look foolish for not waiting until the market changed. Trying to time a housing market is almost impossible and usually depends on luck more then skill. Often by the time the general public realizes a market has changed it is too late to get in at the right time.

I think people are truly afraid to make a decision. People would rather make a mistake about a spouse then a house. We have changed the concept of homeownership from one of shelter to a financial commodity. In fact there is talk of a new stock site that will allow you to hedge on your home's value and go long or short on price.

So here's a thought... In Manhattan Beach there are currently 215 homes on the market. 70 have been listed since October 1; 23 have gone into escrow since October 1; and 18 have closed escrow in the same period. So let's say that by next week perhaps another 10 homes are in escrow and 5 new ones have been added so we are 5 down in inventory to 210 as of Nov 1. As we get closer to the holidays about 15% (30) of the homes now available will be taken off the market each month. There will be a few new listings maybe 8 added per month. So... 30-8= 22 x 2 months 44 homes off the market in November and December. Perhaps another 15 a month go into escrow.. that's 30 gone. Not a lot of sales but the inventory level would go from 210 as of Nov 1 to 136 in January. That's about a 35% change in inventory. Would a 35% change and low interest rates bring out buyers? Let's compare notes in January.