AP - Construction of new homes plummeted in April - REALLY????

The influence of the media has a HUGE effect on how consumers understand the housing market.  The problem is that the majority of the time the media gives the wrong message. 

I came across an article today by the Associated Press with a headline reading "Construction of New Homes Plummeted in April."  The problem with this headline is that when you actually read the whole story, they clearly indicate that the FACTS showed the following:  "Home construction activity was uneven across the country. It fell 23 percent in the South and nearly 5 percent in the Northeast but rose almost 4 percent in the West and nearly 16 percent in the Midwest." Yet the author opted to run with a headline that completely misrepresents the FACTS about home construction.

Obviously if you live in the Midwest you love the fact that new home construction rose nearly 16 percent!!!  Granted, if you live in the south the news of new construction dropping 23 percent is not something you were hoping to hear.  BUT the bigger point is how the media can manipulate the perception of what is truly happening to the housing market in our country.

We MUST understand how the housing market works and realize that it's our job/duty to ensure that the consumer understands the FACTS about the most important real estate market - their own.  If you are in the real estate or housing industry, do your part to spread the word on the reality of your market, good or bad.  BUT stop letting individuals who don't understand the facts and reality, guide and mold your lively hood in a direction that only serves their wellbeing. 

The media is a tricky animal and if left unchecked it will prolong the misperception of the real estate market.  I firmly understand that the market is not a rosy picture, but I also know things are improving and both sides of the story MUST be accurately represented. 

Micro-Markets, The Key To Real Estate

As the housing market makes it's adjustment from the dark depths of the "bottom," we'll have to be smart about interpreting what this means for "our" market.  We're starting to see glimmers of hope in real estate.  Banks are starting to lend again and consumers are starting to get back into the market, but the important thing to understand is that blanket statements, about the "health" of the real estate market, are NOT going to give you an accurate picture of 'your' micro-market.  These broad brush stroke statements are an injustice in helping you understand your home, your market and what you need to do. 

As the real estate market begins its climb there will be imbalances within all local markets.  These imbalances are created by micro-markets within a particular area.  I also like to refer to these as 'neighborhood-markets' and the data for these areas will be a bit harder to locate.  Information on micro-markets won't pop up on the evening news, they won't be mentioned in the national media and they won't appear in your local paper.  These markets will be the pockets within your county, city and neighborhoods.  You'll see a level of activity in one area that won't be mirrored in other areas.  You'll see homes selling on one street and nothing on its neighboring avenue.

To give you an example, over the past year I've seen a tremendous amount of home sales in my local town.  Sadly the majority of activity has been isolated to only a five block radius.  Overall the statistics for home sales has not been overly positive for my town, but if we were to look at this particular location, the story would read much differently.  In fact the statistics, for this area, would be reminiscent of the "boom years."  There's certainly micro-markets that are within my town, the real question is what does this mean?

The answer is simple, you MUST look deep into the statistics of your "area."  That does not mean simply looking at the statistics for your town, but rather your particular street.  Real estate has always been about LOCATION and as we come out of this housing recession, understanding your micro-market will be the most important lesson you could learn.  Understand your micro-market and you'll have the confidence to make the correct decision when it comes to buying or selling real estate.

Understand YOUR Housing Market

The most important thing to understand is that housing markets vary from state to state, town to town, neighborhood to neighborhood.  You can NOT get an accurate view of your housing market by reading national headlines!!!  If you live in Chicago, who cares what the housing market is doing in San Diego.  Concentrating on information about other markets is only going to cloud the accurate view of your local housing market.   

A perfect example is to look at the housing markets of Detroit and Las Vegas.  When it comes to depressed housing markets, they are two of the hardest hit cities in the country.  Now if we study their median house price, foreclosure rate and yearly sales figures, they're going to be completely different than Chicago's.  As you can see it wouldn't help to understand the housing market of Chicago by studying Detroit or Las Vegas.  The same can be said for even local neighborhoods.   It wouldn't make much sense to study the South Side of Chicago's real estate market in an attempt to get an idea of the housing market on the Northshore.

So, the key is to concentrate on your local area.  Look at what the housing market is doing in your neighborhood, your town and the surrounding area.  This will give you the best picture of what is going on and tell you the impact, good or bad, that the housing market is having on your personal home.

Don't let misleading information cloud your judgement on what is best for your real estate decisions.  Stay focused on your local area and you'll be well equipped in understanding the housing situation in the area that will affect you most; your neighborhood.

Today's A Great Time To Buy A Home

This headline is one of the most accurate statements to date.  But before I go any farther you must understand that this statement assumes you're in a position to afford a new home.  If you don't know how much you can afford and have not spoken to a lender or financial institution, then stop your home search and get your affairs in order! 

For the sake of this post, I'll assume you've done your homework and have been pre-qualified by a lender.  You're now in a position to take advantage of the amazing opportunity that the housing market is providing.  Today is a great time to buy a home!  Yes, you've heard me correctly and yes I understand that I'm in the industry and most likely come across as having a bias opinion.  But the great thing about that statement is that the numbers don't lie.  Let me show you why buying a home in today's market is a great financial investment.

In this exercise let's assume you currently live in a $200,000 house and are in the market to purchase a new home for $300,000.  In today's economic climate housing prices in "your market" have dropped 25% across the board.  You understand this reality and sell your current home for $150,000.  I know, you're disheartened at your loss of $50,000 on the sale of your home.  But you now purchase your new home at that same 25% price reduction for $225,000.  A savings of $75,000 from the original price!  When comparing the sale of your current home and the saving from your new home, you actually saved $25,000.00!!!!  Not only did you just save on the overall price, but your new mortgage is for a lesser amount and you've taken advantage of the historically low mortgage rates.  The overall savings for your new purchase GREATLY out weighs the equity loss on your original home.

Please remember that when the market is "hot" the opposite occurs.  You get more money for the sale of your home, but you also pay more for that new home.  Let's assume the market is "hot" and prices have risen 25% across the board.  Instead of selling your existing home for $200,000 you sell it for $250,000 (an increase of 25%) and make an extra $50,000 BUT instead of buying that new home for $300,000 you now buy it for $375,000 (an increase of 25%) and an extra cost of $75,000!!!  You made $50,000 extra on your sale, but are paying an extra $75,000 for your new home.  You end up paying an extra $25,0000 more for that same house because you bought it in a "hot" market.  Not to mention your mortgage if now for a higher amount.  Higher mortgage payments, higher real estate taxes, more money out of your pocket!!!

Whenever I talk to people about "Today" being a great time to buy, they are quick to tell me I'm crazy, but if you do the math and understand exactly how your money and the market works, you'll quickly see that a "Down" market is a great time to BUY.  

Remember, there's never been a successful businessman or businesswoman who has made money from buying when a market is 'hot' and selling when it's 'hot.'  Business 101 reminds us of the basic principal of buying low.  Don't complicate the situation, understand your financial position and if you're ready to make a new home purchase, be confident that there's never been a better time to buy than "Today."