When is a strong economy, real estate market a negative?
(As seen in the 2/16/18 Ledger column)
There have been many occasions when I have rued that day 39 years ago when my lifelong friend Lee Williams suggested that I join him in the real estate profession. Those rare occurrences have been greatly overshadowed with fun, exciting and rewarding experiences, many of which you see revealed here each week.
The past two weeks, I watched our office television in disbelief as I saw the stock market careening and plummeting. One day last week, after watching the Dow dive, I had to go show some properties. As I walked to my car, I noticed a wealth management expert who has offices in our building sitting in his car in our parking lot, his head facing upward with his eyes staring vacantly at the ceiling of the car in a trancelike state.
I approached him to see if he was in need of assistance.
After assurances that he was doing as well as anyone who manages hundreds of millions of other peoples’ dollars, he said the bad news is that the strong economy is the reason for this crash.
I left, confused and debating as to whether or not to call some of the astute psychiatrists who also lease space in our complex.
As the day went on, I heard more and more commentary that supported his assessment, and I shall not venture into the economic and financial experts’ fields to attempt to explain what most of you know.
The strong economy is forcing interest rates to rise, and that is causing some correction and, evidently, some profit taking.
As bad as things get in real estate with low appraisals, horrific inspection reports, rising rates and impassioned buyers and sellers, at least I have never had to say that the market is so strong the value of real estate is plunging.
For that I am grateful.
Yet, Realtors face a similar dilemma, as least as far as statistics go. The market is so hot that sales numbers are dropping. Fewer houses were sold in December and January than were sold in the same months last year.
Way back in 2017, the Greater Nashville area set the record for the most individual home sales in a calendar year with 40,482 closed sales according to Realtracs. Realtracs is the Middle Tennessee Regional Multiple Listing Service and tracks only sales that were posted on its service.
Therefore, many sales were not included, as some builders and developers do not list their properties and certainly some property owners sell houses outside the MLS.
Although the December sales tipped the scales and set the record, those sales were down one percent from the previous December. That trend has continued in 2017 as sales dropped 4.7 percent in January with 2,298 sales, compared to 2,411 sales last year.
Lack of inventory continues to haunt the market, dropping yet again, this time from 8,608 to 8,332, or about 3.2 percent. With 3.7 percent of the inventory gone, it would seem reasonable that sales would follow. Going into February there are less homes for sale and more buyers.
The frigid temperatures also were a factor in the slower month, Greater Nashville Realtors President Sher Powers noted, stating “colder months are by nature tougher on the housing market.”
Coupled with that were the numerous days that the schools were closed. Few choose to drag children into cars in single-digit temperatures to view houses.
One perplexing number has pending sales up at the end of last month with 2,471, yet only 2,298 made it to the closing table. For January, that number was 2,951, compared to 2,871 last year.
The 2,471 pending sales for December were more than the 2,209 sales pending for the prior December. With this margin tighter, sales could continue to trend lower than last year.
Lack of inventory and cold weather were the key factors in this slowdown, and every year cannot surpass the prior year. With the erratic stock market and rising rates, there may be apprehension going forward. We’ll see.
Richard Courtney is a licensed real estate broker with Christianson, Patterson, Courtney and can be reached at [email protected].