Yet Another Setback for Housing this Year, or No?

By Bill Primavera

The Home Guru

What would be your response if told that, after all we’ve been through in the housing crisis of the past two years, home values may continue to decline this year by as much as 15, 20 or even 25 percent?  When I read this forecast by a respected authority last Wednesday in The New York Times, The Wall Street Journal and several online blogs, my response was, “Holy Moley!”

But when I got over my initial panic attack, I reminded myself that real estate predictions are much like weather forecasts, only less reliable.  There is the national and the local outlook, as on the Today Show when Al Roker finishes his national forecast by saying, “Now let’s see what’s happening in your neck of the woods.”

Last week’s forecast neglected to check out our neck of the woods. 

Nevertheless, when Robert J. Shiller speaks, the real estate industry and consumers listen. And when he spoke last week, we really listened and moaned.

As the granddaddy of all real estate forecasters, Shiller is a Yale economist who developed the Standard & Poor’s /Case-Shiller Home Price Index to help homebuyers and investors make informed decisions.  And there are accounts that, since the beginnings of the service in the early 1980s, Case-Shiller forecasts have never proved wrong.  Substantiating that anecdotal claim would be too big a project for my purposes and, at the same time, I am well aware that statistics can be interpreted in many ways and that the aggregate does not always represent all its parts. 

Since our peak at the very top of the real estate bubble, the Case-Shiller composite is off 31.2 percent, and in some cities like Atlanta, Cleveland, Las Vegas and Detroit, home prices are below the levels of 11 years ago, and more cities are about to join that group. This means that we have a “lost decade” for housing appreciation in much of the country.

We really have to listen to who’s saying what before we believe the headlines. For instance, Karl E. Case, the partner of Mr. Shiller differs with his associate on this point and believes that the outlook is not so dire. He feels that the market is at “a rocky bottom with a down trend,” according to the Times. Favoring the latter opinion is the fact that the two-month drop in the index during November and December was about half the drop in the previous two months, indicating that the slide might be slowing down. 

Even though affordability is very high and housing is incredibly cheap, there are so many variables in determining whether we’re going to climb out of this hole any time soon.  There was optimism prompted by the surge of home sales in the fall of 2009 and spring of 2010, but that did not lay the foundation for a permanent rebound. The other variables are the backlog of distressed home sales that are now flooding the market, the uncertainties over the mortgage holding companies Fannie Mae and Freddie Mac, and the proposals afoot to reduce the mortgage tax deductions.

Whenever I want the clearest picture of local housing statistics, I consult with the managing broker of Coldwell Banker in Yorktown, Joe Monaco, who is constantly assessing housing statistics and sharing them with his agents.

“Buyers and sellers need to obtain and understand local information and not be swayed by wide geographical analysis,” Monaco said in response to the report.  “Just in Yorktown, unit sales dropped from 469 in 2009 to 459 in 2010, and the average sales price declined only $1,076 from $417,219 to $416,143. This performance provides strong promise that the market is stabilizing, a necessary prelude to recovery.”

Further demonstrating that sales data is very local, Monaco noted that in lower Westchester, the market experienced a rebound in 2010 in both unit sales and prices, propelled by lower property values from the market highs of just a few years ago and proximity to Manhattan. Some locales had a 40% increase in unit sales and a 15% increase in the average sales price in year over year comparisons.

Meanwhile, Westchester County total sales data, year over year, is pointing to a path of recovery. Unit sales in 2010 were up by 5% and the average selling price increased nearly 10 percent to $851,124 from $775,756 in 2009.

“As you can see, even in just comparing Northern and lower Westchester, performance is very local,” Monaco said.

“Many political and economic factors are involved in forecasting real estate’s future, but real jobs, consumer confidence and financing are the factors that influence consumer real estate decisions,” Monaco continued. “My position is that the American dream is still alive and well in our area, and I believe that now is the time to buy. And, I believe this so much that I’ve assisted two of my own daughters to buy homes just in the past few months.”

Bill Primavera is a licensed Realtor® (, affiliated with Coldwell Banker, and a marketing practitioner ( For questions or comments about the housing market, or selling or buying a home, he can be reached directly at 914-522-2076.