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Reading Tea Leaves

Market predictions are tough.  But we still make them to the best of our ability.  What we can tell you is that we try to be as considerate as we can in analyzing the data and that we eat our own cooking.  The very same market predictions and conclusions that we share with clients, we use ourselves to inform our own decisions to purchase and sell real estate for our own benefit.

One useful buy or sell signal that we rely on is data on the number of homes sold.  Because this number varies considerably from month to month, it is useful to look at year over year changes in the number of homes sold.  Graphically, we chart the number of detached homes sold in any rolling 12-month period.

As you can see in the red bars on this chart, the rolling 12 month number of detached homes sold is a useful barometer of turning points in the market.  In this instance the explosion in the number of units sold presaged a strong movement in the median value of homes (the blue line chart).

I’m occasionally asked why, following the run up in sold unit volume from just over 20,000 per year to over 25,000 year and back down to roughly 21,000 units per year we have not seen a change in the price trend as the median sale price is still grinding higher.  In short—inertia.  If this is of interest by all means set up a consultation with us and we can discuss this further.  Let me leave you with a thought: should the number of homes sold in the trailing 12 months fall to 18,000 where do you see home prices going?

 

Bob Flynn, November 2016