More National Real Estate News: Why Are the Prognosticators So Far Off?

New home sales figures are less important to those of us following the Flagstaff real estate market than the resale numbers which were announced yesterday.  I do find the news interesting in that the economists predicting the results where way off base for both sets of measures. Two days in a row, the economists got the housing market wrong! Kind of shakes my confidence in what they can predict. Who are they anyway? Mostly bankers and academic economists rather than people in the trenches like your local Flagstaff real estate agents.

So, here’s what happened with the new homes sales: This morning’s print edition of the Wall Street Journal (also available on line) said: “Consensus forecast: down 2.5%.” Then, when the numbers were actually released at 10:00 a.m. by the U.S. Commerce Department, here was the news:

“September U.S. new home sales, lifted by demand in the West, recovered a bit from an August plunge.... Sales of single-family homes increased 4.8% last month” From the Wall Street Journal Online Edition.

Why are the prognosticators so far wrong – predicting a further drop instead of an increase? Perhaps because they are not “on the ground” seeing what agents see, namely that builders – the most sophisticated sellers in the market -- are offering incentives that resale owners sometimes over look.  First, builders have reduced their prices. In addition, they are offering to pay closing costs and to “buy down” mortgage interest rates for their new homeowners. Finally, they are offering incentives to agents to show their properties first among the mass of inventory available to buyers. (The ethics of buyers’ agents doing this could be a subject for another entire post.)

Resale sellers can make these offers also, they just need to have good advice from their real estate agents telling them they can compete, and they have to have an agent who can get the word out about the incentives being offered, because it’s not just a simple “check the box” on the standard Flagstaff MLS datasheet. Finally, the agent representing the seller needs to understand how these incentives affect a buyer’s mortgage program, and must be able to communicate with the lender to make sure there are no last minute snags because the transaction is not a “cookie-cutter” version.