In today’s New York Times, reporter David Streitfeld discovers that a number of others, including me, have been saying for months: Home prices and sales could continue to decline. The way the article is written would lead–and doubtless will lead–readers to believe that the sky is falling.
Yes, it’s undeniable that many variables could change the anemically recovering housing market. Among them are consumer confidence, unemployment rate, inflation, mortgage rates and a rise in the rate of foreclosures.
If the controversial tax credit for first-time buyers is allowed to expire on Nov. 30, we may well see significant impact on the statistics. The Times omitted mention of the fact that Sen. Christopher Dodd said yesterday that a consensus was growing to extend it. That credit may well have spurred purchases (or merely helped folks who were going to buy anyway).
Whether tax motivated purchases reflect the market’s health is open to question, at least by me. I don’t know that buyers for whom the $8,000 credit made a difference affected all segments of the market. If they were going to buy anyway, it didn’t. If they were thinking of more expensive properties, it probably didn’t either.
Okay, that’s arguable. But every single gauge of the housing market is flawed, including the Federal Housing Finance Agency’s, the U.S. Commerce Department’s and the National Association of Realtors’s.
And as far I’m concerned, the widely cited Case-Shiller statistics prove almost nothing. As I have said, they leave out apartment sales. They also pretend that 10 or 20 metropolitan areas compose a representative sample. Indeed, a metropolitan area such as New York covers profoundly diverse housing markets–from Westchester County and suburban New Jersey to Queens and Manhattan.
You may unjustifiably label me a cheerleader, but what irritates me about the Times piece is the extent of its sensationalism and imbalance (with the small exception of a positive quotation from Karl E. Case, the “Case” in Case-Shiller).
If you trouble to check out my previous posts as well as the bi-weekly e-newsletter I write (and who could blame you for giving up?), you’ll see that I do envision as much as a 5-10 percent drop in prices in Manhattan by next year. Yet I hedge my prediction by noting that buyers are now leaping into the market again, fearful of missing the bottom and concerned about the likelihood or rising mortgage rates.
So, the Times is wrong; at least it’s tone is wrong. The sky is not falling. The only thing that can be said with any confidence is that it’s partly cloudy.
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