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Even though it is raining outside (and we need it in North Georgia), it is a great day. Bloomberg is reporting that September homesales increased both month over month and year over year for the second month in a row. This is important as the numbers show that foreclosures and REOs are continuing to drive price declines. The reason it is important is because it shows that market forces are correcting the imbalance in the number of available resale homes. The supply of resale homes dropped to 9.9 months from 10.6 months in August. Alan Greenspan (who agrees with me on this) is of the opinion that we will see more “normal” market conditions in real estate by the second half of next year.
This makes sense since the peak in the real estate market was in 2005. That means we have been in this “bear market” since then. Once resales stabilize and the number of REOs and foreclosures as a percentage of the total resales falls, we will begin to see new construction number recover. That is probably a year to eighteen months away.
My point is that what we hear in the media is always based on trailing indicators. Indeed, the September numbers are now almost two months old. The media also has reasons to hype bad news (depending on your preferred conspiracy theory – to either sell commercial air time or to support a candidate for political office) and ignore good news. They also poorly analyze various trends. When you connect the dots, you will see that the market – not the government – is driving a recovery.
Brian M. Dubuc
Attorney at Law
Dubuc and Associates, LLC
bd@dubuclaw.com
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