Yesterday the Columbus Board of Realtors published home sales statistics for June 2011. The media sharks have been waiting for this moment in their press rooms to report more bad news about the real estate market.
Lets take a look at a newspaper you should be able to trust when it comes to economic news – Business First. The title of their article reads Columbus area home sales slide in June. The number of home sales dropped by 17% as compared to June 2011. Once again, it appears that the housing market is “going South”.
Nothing can be further from the truth! The headline does not tell the full story.
I do not know why most media outlets jump at any hint of bad economic news and avoid analyzing the background behind the story. A month ago I explained in this blog that a comparison of home sales between 2011 and 2010 shows a wrong picture.
Last June the home buyer tax credit was still available. It boosted sales in the first half of the year. However, we saw a dramatic, 35%, month-to-month drop in home sales last July, when the tax credit expired. And the remainder of 2010 was terrible for everyone in the real estate industry.
Here’s my bold prediction: Home sales for July 2011 and the rest of the summer will be 20% above last year’s.
Why can I make this prediction?
It’s really simple, if you read the full Business First article and look at the charts in my previous post.
The main reason why sales will continue to go up is the fact that pending contracts are soaring. They are ahead by 55% over this time last year. These sales will close in July and August.
The other reason why sales will continue to increase is simply based on typical home buying patterns. Without the tax credit home sales usually peak in summer. Take a look at this trend: from May to June home sales rose by 6% in 2011 (and by a similar rate in 2009), however, they dropped by 8% in 2010, as the tax credit was expiring.
You can see a similar pattern for 2011 and for 2009, when the home buyer tax credit did not distort sales. At least not in the first half of the year. I believe we will follow the pattern of 2009 and see a continued increase in home sales till the end of summer.
Let me know what you think! Leave a comment in the box below.
We should know in a few weeks, if I was right.