Sometimes, numbers do lie

Palm Coast Observer
Opinion

I’ve always watched numbers for early indications of market changes or to determine trends, but too many outside influences are messing with the data these days.

The simple supply-demand analysis doesn’t work as well anymore. When prices went down, it used to signal either reduced demand or increased supply. When more buyers wanted new homes, more building permits were issued. Lower mortgage interest rates meant homes became more affordable, which resulted in more home purchases, more new home construction and increased refinancing.

With all the fluctuation, traditional analysis has become increasingly speculative.

In Flagler County, 117 single-family home sales were reported closed during October, through the Multiple Listing Service, compared to 127 in September, and 130 in October 2009.

Last year, the first-time homebuyer tax credit was on the table. This year it’s not. So this year’s drop over October 2009 is not significant, especially because October sales averaged only 106 homes in the three years from 2006 to 2008. Normal fluctuation for the season accounts for the September-to-October drop. The fourth quarter (plus January) is traditionally slow for real estate closings. October sales have fallen slightly short of September sales in four of the last five years.

Tracking foreclosure filings and foreclosure sales is likewise problematic. The sheer volume of foreclosures exposed the lending industry’s utter failure to cope. Lenders got caught illegally creating documents out of thin air.

There are so many foreclosures being canceled and refiled that the Clerk of Courts cannot keep up. Deed and foreclosure filings are running more than two weeks behind. It has been over a month since schedule of foreclosure sales has been posted.

Reacting to some of the loose appraisal standards that helped fuel the housing boom, the government overreacted. New appraisal guidelines often result in out-of-town appraisers, unfamiliar with the local housing market, setting local values for prospective lenders.

Many think current appraisals are unfairly affected by the preponderance of REO (lender owned) sales and short sales. Adjustments are supposed to be made but often are not. Some local builders have told me they have plenty of interest but they lost sales because the appraisal did not support new construction costs. The demand is there, but building permits are not.

Finally, mortgage interest rates are at their lowest levels in years. One would expect a rush to refinance at such historically low rates. Unfortunately, the low rates coincide with the tightest lending standards in recent history. First, it’s hard to refinance when you are underwater. Second, new lending standards rule out so many other applicants.