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The national media tends to focus on home prices as the measuring stick for the health of a real estate market. I completely disagree and believe that the velocity of sales and total dollar volume/number of sales is a more appropriate method of measurement
(Nashville, TN)

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Nashville Grant posted on 22 Dec 2009 08:07 AM

The national media tends to focus on home prices as the measuring stick for the health of a real estate market. I completely disagree and believe that the velocity of sales and total dollar volume/number of sales is a more appropriate method of measurement.

What do you guys think?

Grant Hammond, Broker, ABR

Grant is a Nashville real estate expert & 27 award winning Broker.

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Seels replied on 13 Jan 2010 11:09 AM

Like in all things, it's relative. Home prices and trends of sales can be very misleading due to very little movement in a certain segment, or an outsized velocity in a certain segment.  The velocity of sales and total $ is very useful but not as a stand alone statistic.  I would say the health of the housing market is dependent on the % of performing/nonperforming loans.  As if the loans start to fall out, eventually it will come home to roost...and the Fed can only delay it so long.  Just the base housing formation numbers show that there are far too many homes/rentals for the population we have. And these numbers do not account for collapsing household formation...ie households increasing in size, as kids move back home, etc.  The number one correlation for defaults is negative equity...even more so than jobs.  That appears to be gaining momentum from the NYT magazine article advocating walking away from morgages and making it a financial decision and not an ethical decision.

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Nashville Grant replied on 13 Jan 2010 07:46 PM

I did see that NYT article and was pretty floored that a publisher would take it that far. The thing with being upside down is that the loss is a paper loss that is not realized until you actually sell. Statistics show that less than 15% of homeowners who are underwater "have to sell" and, if true, that would take a heck of a lot of teeth out of this potential threat.

Grant Hammond, Broker, ABR

Grant is a Nashville real estate expert & 27 award winning Broker.

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