Come on – you should know better than to trust their home sales reports by now.
But for some reason, many California real estate agents are still welded to the real estate trade association’s skewed data and perspective. We feel compelled to read it and offer an alternative analysis. Or — scratch that — the correct analysis.
The California Association of Realtors (CAR) recently released its January 2014 home sales report — and as usual, it’s stuffed with baloney. Sound delicious? Lets take a look at how this sausage is made.
CAR reports that existing California home sales were down to a seasonally adjusted annualized 363,640 units. This figure marks the sixth straight decline on a year-over-year basis.
CAR president, Kevin Brown, remarks at the beginning of the report,
“The underlying fundamentals for housing demand exists, however, constrained inventory is holding back a stronger recovery as affordability becomes an issue for current homeowners who are reluctant to move due to less attractive mortgage rates and more restrictive lending standards.”
This remark reveals a basic misunderstanding of the concept of demand — a pretty important one for a real estate trade association professional to grasp, don’t you think?
Demand is both willingness and ability to buy. If demand were simply the desire for a product, as many misunderstand it to be, one can imagine that the demand for luxury automobiles and high-tier homes would be through the roof (pardon the bad pun).
But, you might say, prices don’t rise in a situation of falling demand, and California real estate prices are still increasing. True, but they were artificially inflated by speculators to begin with. And we’re not concerned with the demand created by gamblers in for a quick profit. Their contribution is temporary, adding nothing to the market but a momentary distortion.
Our market still suffers from a crippling lack of demand — just look at the zero-bounded rates, under-employment and stagnant home sales volume.
The trade association wants all their loyal followers to believe there simply aren’t enough homes to go around.
Well, we’ll let you in on a little secret: a potentially infinite supply of real estate is just waiting to materialize. If true end user demand existed, you’d see a glut of builder inventory, and existing homes “miraculously” appearing on the market due to homeowner turnover. This just ain’t happening.
So please, ignore this notion of healthy demand constrained by low supply. Demand must be stimulated during economic recoveries. Convincing ourselves the demand is out there only prolongs the secular stagnation from which we now suffer.
The trade association ought to know better, but they have memberships to sell.