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Comparing ‘apples to apples’ in the housing market

By: 15 January 2011 One Comment

Comparing housing market numbers has been a bit of a chore over the past few months as results from 2008 through the first part of 2010 have been skewed.

Let me explain. From April 2008 through April 2010, tax credits were available for home buyers. Economists have, in general, agreed that the tax credits increased demand for homes. During that two-year period, then, sales were well above what they would have been had the tax credits not been in place.

Additionally, the demand present during those two years was – in a sense – borrowed from the time after the credits expired. In other words, the people who would have bought homes later made the decision to purchase earlier due to the tax credits.

So, what happened after the tax credits expired? Not surprisingly, sales fell off dramatically. That leaves analysts looking at housing markets with a problem – doing an “apples to apples” comparison is difficult. If, for example, we look at the total number of homes sold this month compared to January 2010, that might not give us a true sense of how the market is performing because the influence of the tax credits was present in one month and not the other.

When, then, will we truly be able to do those comparisons that give us a good idea of whether sells are improving or legitimately getting worse? A couple of economists I’ve talked to have said we’ll have to wait until about July until we can compare markets that are operating under similar conditions.

Why? The tax credits may have expired in April, but buyers were originally told to get houses under contract by the end of April and close on them before July 1. That deadline to close was pushed back to the end of September, but most Arkansans were able to complete their sales prior to July 1.

Come July, then, we can take a look at sales in that month and the same one a year ago and start to get a sense of whether the market is improving or not.

Speaking of increases, the national Mortgage Bankers Association has predicted a slight increase in homes sales this year compared to 2010. Specifically, the association has forecast $615 billion in purchase originations this year compared to $473 billion in 2010. While we’re not looking at a record setting increase, a gain in sales would be welcome news.

Meanwhile, the association does predict the number of people refinancing their mortgages will decline this year. We saw record rates of 4.5 percent or lower on 30-year, fixed interest mortgages in 2010 and the association expects to see those rates climb to 5.5 percent at the end of the year.

Still, an improvement in homes sales is a very good sign for the economy. It means more people have jobs or, at least, feel secure in their employment. It’s also a sign of improving consumer confidence.

Let’s home the Mortgage Bankers Association is correct in its forecast.

Column written by Ethan C. Nobles and distributed to Arkansas publications on behalf of the Mortgage Bankers Association of Arkansas.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email =

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