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Don’t believe everything you read. That directive doesn’t mean you should stop reading, but, rather, that it might be prudent to read critically.  What does reading critically entail?  Not taking everything a face value. Questioning sources and statistics .  Challenging assumptions. Processing conflicting information and deciding what it means. To illustrate what I’m talking about, here’s a good example.  I recently read an article that a fellow realtor posted on a community Facebook page.  It was titled “Why the Supply of Homes for Sale is the Lowest Since 1999”. So, being a realtor, I was curious, clicked on the link and began reading. Now, I was already skeptical as it is common knowledge that “real estate is local”, so sweeping statements with no specificity had me doubtful about the credulity of the article before I even started reading.

It starts out with a semi-hysterical declaration that there is very little inventory, providing a statistic that a marker called the months’ supply of inventory (normally about six months’ in a balanced market) is around three and a half right now.  It even quotes a market “expert” who describes the demand for homes as “titanic”.  While I’m certainly hearing my buyers say “there’s no inventory”, the numbers didn’t ring true to me, so I looked up stats for my local area, which is running about six or seven months’ supply of inventory. (so, normal). On a side note, I’d like to remind you that, as the saying goes, statistics lie.  Here’s what I mean: when I looked up the MSI for my area, over a two-year period, I can look at the net change over the entire time period.  I can look at what it was 24 months ago and then “skip” to what it is now and compare those two figures.  The difference in the two numbers? about 30%.  Yeah.  When you look at the net change, it’s around 9%, but when you look at the one that compares January 2105 to January 2017, due to a particularly high MSA for January 2017 (an anomaly, as you can see from the chart), the math shows a change of 39.9%!  So be sure that when you look at statistics, you understand the criteria and methods used to calculate them.

TThe next section explains that, due to a dearth of inventory to buy, “This means fierce competition for homes”. Ok. That makes sense, in markets where there’s low inventory. I can buy that reasoning.  However, the author posits that with rising mortgage rates and every-stricter lender guidelines, fewer first-time buyers are able to even consider a purchase and that that specific segment of the buying population has dropped the most (making up less than a third, when it has historically been about 40%). So now the author is telling us that there is at least one buyer group that is not in competition for the few listings there are, because they can’t qualify for mortgages. Hmmmm.

In another paragraph, the author points out that the main reason for the lack of inventory is that the building industry is still rebounding from the recession and not building new construction as fast as it used to and that it is not keeping up with demand.  She also says that with rising costs of labor and land, very little of that already depleted new construction is lower cost housing (in a first-time home buyer’s price range, she implies).  Well, again, taken in a vacuum, that summary seems logical. And it is.  The problem is that while the rising mortgage rates affect everyone nationally (they are federal, not local rates), what is being built and what types of buyers are in the marketplace is incredibly local.

I realized that this article just didn’t pertain to our area for a few different reasons.  First, the Main Line is a very old area and we have practically no new construction at all–so a slow down in new building, or an even bigger slow down in lower priced new building was irrelevant.  Second, while the first time buyer not being able to find any inventory to buy due to that building slow down was also not applicable as very few lower budget buyers ever look in our region because our values tend to be outside of their price range.  So the first time buyer’s obstacles shouldn’t greatly affect the Main Line’s marketplace.

What is in high demand in our area is a specific feature: updatedness. With rates, still fairly low, most buyers can much better afford to finance an extra 100,000 for a house someone has fixed up than come up with that extra cash, to say nothing of the logistics (esp if owners both work and can’t be supervising big const projects) of remodeling. So it’s not that there’s no inventory; it’s that it’s low in the category people want. Also, consider this: not that many people sink $100,000 or more into updating and then sell. So the re-done houses are even that much more rarely available.

When I finished the article, I was so annoyed at just how poorly it explained anything, that I just needed to vent (hence this response). So, the takeaways?  Real estate is hyper local and when you read, do it with a critical eye and a large grain of salt at the ready, particularly because statistics can be very slippery in terms of exactly what information they are actually representing.