Wednesday, October 9, 2013

National Economic Outlook - October 2013

 
Written By:
Ingo Winzer, President
Local Market Monitor


The government shutdown means there are no statistics for us to analyze or comment on. So it's a good time to discuss the reliability of the data we use to understand real estate markets.

The most well-know statistic for real estate is home prices; particularly, how much home prices have changed in the past year. Sophisticated methods use actual sales data to calculate this number for the country as a whole and for local markets.

A very big problem right now is that the sales data do not tell us how the value of the average house changed in the past year, because many of the actual sales in the past year were not of average homes. They were sales of foreclosed properties.

The contamination of the data with foreclosures makes it seem that home values are sharply higher in many markets, and that the housing bust is quickly turning into another boom. I believe, instead, that we are in for a long period of very modest value increases that only becomes apparent once the foreclosures are washed out of the system.

We won't know for a while.

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