What's going on? Home sales booming in bad markets, sinking in good ones.

Posted by: Prashant Gopal on August 15, 2008


I was playing around this morning with the National Association of Realtors’ second-quarter home sales data (I know, I lead an exciting life) and I noticed something startling.

We’re entering a kind of real estate Twilight Zone.

Many of the states with the best housing and job markets (Washington, Idaho, Oregon, Hawaii, North Carolina) have had the biggest drops in sales, and the worst markets, in terms of foreclosure rates and home price declines (Arizona, California, Nevada, Ohio and Florida), are now seeing the strongest sales. Home sales in the robust Washington state market fell 36.6% in the second quarter compared to the same period a year ago. During the same one-year stretch, home prices in the Yakima (Wash.) metro area increased by 8.9% — the highest appreciation of any metro area tracked by the Realtor group. Home sales in Nevada increased 17.9% in the second quarter and home prices fell 23.6% in the Las Vegas-Paradise metro area.

To explain this phenomenon, it helps to remember that the credit crisis began one year ago. Last summer, the weakest housing markets, in Nevada, California, Arizona and Florida, were already seeing rapidly falling home prices and sales. But the stable markets in Utah, Idaho, Washington and North Carolina weren’t. After the credit-crunch began in August, those markets suddenly began to flag as buyers found it increasingly difficult to secure mortgages.

At the same time, foreclosures pushed home prices so low in California, Arizona, Florida, and Nevada markets that they became more affordable and attractive for first-time homebuyers and investors. Sales in many of the weakest markets suddenly began increasing. I’ve heard anecdotally that some foreclosed homes in California are getting competing offers from investors and first-time buyers.

States like New York and Texas, which have good job markets, don’t seem to be following this trend. They have maintained relatively stable home prices and sales.

And now, the states with the best and worst sales for the second quarter:

BEST

1. NEVADA 17.9%
2. CALIFORNIA 3.7%
3. ARIZONA -4.2%
4. VIRGINIA -8.1%
5. SOUTH DAKOTA -8.7%
6. OHIO -10.5%
7. MINNESOTA -10.8%
8. NORTH DAKOTA -11.4%
9. NEW YORK -11.6%
10. COLORADO -11.7%


WORST

1. WASHINGTON -36.6%
2. IDAHO -33.7%
3. OREGON -33.5%
4. IOWA -31.7%
5. HAWAII -31.1%
6. MARYLAND -30.0%
7. DELAWARE -29.3%
8. NORTH CAROLINA -29.1%
9. WYOMING -28.2%
10. District of Columbia -28.0%

Reader Comments

Devin Serpa

August 15, 2008 9:48 PM

It's because the foreclosure properties are steals at current prices. It's not the Twilight Zone, it's the market is correcting itself.

Snoz

August 15, 2008 11:41 PM

NAR would have you believe that the real estate bust is over. NAR has always painted a rosy picture about real estate appreciation and rising sales. That is its goal. NAR's directive is to promote sales of real estate with the zeal of Madison Avenue. During the 2002 thru 2006 real estate feeding frenzy, NAR kept quiet about the impending bust and how many people would lose their home and savings; how the speculation will blow-up many people, and how catastrophic price declines will bankrupt some. People who believed in the rosy picture put out by NAR during the feeding frenzy are now suffering for being so gullible. NAR would want you to believe real estate prices will always go up, nobody ever lost money in real estate, and now is the best time to buy. NAR wants you to start buying because the real estate prices is continuing to collapse. The liquidity crisis, high construction unemployment, auto manufacturing layoff, high crude oil prices, and inflation, are all hurting consumers spending. These forces are driving the economy into a downward spiral that hurts NAR's wish for higher real estate prices. The NAR is not friendly to your average homeowner. NAR serves its special interest members only. NAR is not your friend -- unless you are in the real estate sales.

John

August 17, 2008 9:30 AM


Dear friend,

Accept my sincere thanks and appreciation


John


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jack spero

August 25, 2008 8:38 PM

I HOPE THAT NAR GOALS ACHIEVED AND INCREASING SALES FIGURES AND DECREASING INFLATION,LIQUIDITY Washington Drug Addiction

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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