Real estate market healthier than reported; news market rancid

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

Thrills, chills, front-page headlines — everything but the truth. It’s a way of life for Dr. Jay Butler of the The Arizona Real Estate Center. Today’s Republic trumpets June was cold month for resales:

The Valley’s resale housing market took a hard fall in June, its worst performance for the month since 2000 and clear evidence that buyers sat out the start of the crucial summer selling season.

That “worst performance for the month since 2000” business is interesting, and it comes straight from Butler. It sounds authoritative, but it’s actually like a baseball card statistic, useful only in context. Dr. Butler doesn’t publish his underlying numbers, so there’s no easy way to compare apples to apples.

Here, by contrast, are real numbers drawn from the MLS system:

Number of Homes Sold

March 2003 6471
2004 8678
2005 9959
2006 7469

April 2003 7429
2004 8889
2005 9567
2006 6725

May 2003 7428
2004 8932
2005 9853
2006 7582

June 2003 7409
2004 9969
2005 10225
2006 7209

I don’t have numbers back to 2000, but it doesn’t matter. June 2006 was remarkably like June 2003. As I’ve pointed out before, comparisons to 2004 or 2005 — of which the Republic never tires — are inappropriate. From March of 2004 to September of 2005, we were in an unprecedented boom market. Any year-to-year comparison of now to then is going to make now look pretty anemic. It is only by looking at the long-term trends that we can see that what we have now is very much a normal market, at least from the buyer’s side of the closing table.

Butler leads the reporter down the garden path, and the reporter doesn’t check a single fact. So we get this:

The number of homes for sale and the time it takes to sell them keeps increasing, outpacing even more “normal” years of 2003 and 2004, and the monthly selling reports look dismal.

Average days on market for June 2003: 67. For June 2006: 67.

There were 5,460 existing Valley homes sold in June, down more than 20 percent from May and a nearly 25 percent drop since this year’s market peak in March, according to the Arizona Real Estate Center at Arizona State University Polytechnic.

I don’t know the source of Butler’s numbers. All I have to go by is the independently verifiable MLS system. Homes sold in March 2006: 7469. In April 2006: 6725. In May 2006: 7582. In June 2006: 7209. Is it possible Dr. Butler is making things up? There are always different ways of measuring different phenomena, but I can’t imagine where he’s seeing differences of 20% or 25%.

“It was a lot weaker than I thought it would be,” said Jay Butler, head of the Real Estate Center. “I see a lot of for-sale signs staying up. I’m seeing homes that are on their third agent. Homes are getting initial drive-by activity from buyers, then nothing.”

This would be the patented Dr. Jay Butler intestinal analysis, every bit as valuable as any other thoughtless anecdote.

Want more evidence of thoughtlessness?

Only 17 percent of June sales fell in the $125,000-to-$199,999 range, and that makes it harder for first-timers to find a house they can afford. In the first three months of 2005, 38 percent of homes sold were in the $125,000-to-$199,999 range[…]

Dr. Butler (and his faithful amanuensis at the Republic) seem not to understand that we just went through a price boom. Fewer houses are selling at less than $200,000, but that’s because there are almost no houses priced at less than $200,000. Despite the Republic and it’s love for anecdotal evidence of impending doom, home prices in Metropolitan Phoenix are holding steady, at least so far.

There are more bits of bitter Butler in the Business Journal and the East Valley Tribune. A problem with reading this chaff is distinguishing between “recorded transactions”, which would be MLS + For Sale By Owner + new builds, and “resale homes”, which would omit the new builds. None of the numbers make any sense, which is why Dr. Butler should either make his raw data available or the ever-credulous newspapers should stop quoting him.

The Republic article goes on and on — even making a pit stop to shed an obligatory tear for the poor homeless firefighters and schoolteachers, another data-free ‘trend’ — but it doesn’t matter. In truth, the Republic is only half responsible for the persistent errors of Dr. Butler. After all, the man was running down the real estate market the entire time it was surging ever upward. But the trend that matters most is that fewer and fewer people even read the newspaper. Surely it couldn’t be because the information is of such low quality…