- The month-over-month (M-O-M) comparison and
- The year-over-year (Y-O-Y) comparison
These reports will quantify what’s happening in the marketplace on a national level, but it’s important to understand the factors that are contributing to the numbers to get the whole picture:
The Month-Over-Month Comparison
The M-O-M compares sales this month to last month. This number will probably show an increase. Monday, the Washington Post, in an article titled Expected Rise in Home Sales May Show a Stabilizing Market, called for a substantial increase:
(Nationally) home sales probably increased in August, a sign the U.S. real estate market is stabilizing after the expiration of a tax credit might have caused demand to plunge, economists said before reports on the housing market this week.
Sales of previously owned homes rose to a 4.1 million annual rate in August from a 3.83 million pace, according to the median estimate of economists ahead of the National Association of Realtors’ report on Thursday in Washington.
The actual number probably will show an increase. An increase over what is the question.
Last month, the report showed sales dropped 27.2% in July from June, which was lowest level since the total existing-home sales series launched in 1999.
This vacuum of sales was created by many buyers moving up their purchases to before the June 30, 2010 deadline for closings as required by the second Homebuyers’ Tax Credit. We’d better hope sales increase over that number! An increase will not necessarily mean the market is now stable. though some media outlets will report just that.
Locally, we have also seen a drop. In June, 2010, 41 homes closed. In July, only 21 closed — a decrease of nearly 49%, due to home buyers pushing up their purchases to June to qualify for the tax credit. In August, 23 closings took place, representing a slight increase over July. August is a very popular month for closings due to many families wanted to get into their new homes in time for the beginning of the school year.
The Y-O-Y compares sales this month to the same month last year. This number may look very ugly. Market Watch ran a story entitled Housing Data Not Expected to Sparkle. They reported that sales will be significantly lower than they have been.
Economists don’t expect many bright spots in the economic data in the coming week that will highlight the gloom of a newly-crippled housing market … Existing-home sales are expected to rebound to 4 million units. But this is only a portion of the record 27.2% plunge in sales in July to 3.83 million units. Sales are down from a peak of 5.79 million units in April.
Obviously, sales for the next few months will not compare favorably to the same months last year. At this time last year, sales were being driven by the expiration of the original Homebuyers’ Tax Credit (November 30). It would be unrealistic to think that this year’s sales wouldn’t pale in comparison.
In Highland Park, the number of closings in June-August of this year vs. June-August of last year varied by month. June of this year, as expected because of the second Homebuyers’ Tax Credit, showed many more closings: 41 this year (as mentioned above) vs. 28 last year, a 32% Y-O-Y increase. July of last year saw 27 home closings, 27% more than July of this year, because buyers pushed ahead their closing dates to June to get in on the tax credit thus taking away July buyers, as stated above. And, as for August, the numbers were almost identical: last year 24 transactions closed as compared with the 23 of this year.
There may be very positive news generated by the national month-over-month numbers and very negative news generated by the national year-over-year numbers. I’m not discounting the fact that headlines do affect the public’s psyche and in turn the market, but keep in mind that real estate is a particularly local thing, and you have to look at what’s going on in your neighborhood to get the picture of what’s truly relevant to you.