Saturday, April 18, 2009

Real Estate Prices Dropping On Increased Volume

The spin masters in our national media have been hard at work lately, trying to make the gloomy housing picture look brighter, while attempting to encourage would be home buyers from the sidelines. This past week was a strong case in point with the release of data which showed increased activity in the real estate market in tandem with falling prices.

If you're a market watcher this is not positive news. Nobody likes to sell a house for a loss, if you paid $200,000 for a home you're going to want to sell it for at least $225,000 or more to cover costs for real estate commissions, legal fees and moving. Only the seller has to worry about an agent's commission, about 5% which equates to $10,000 on a $200K home.

When prices move up or down on light volume it doesn't serve as a strong indication of the overall direction of the market. When volume increases however the movement in price can serve as a strong indicator of the relative strength or weakness in the commodity being traded. In the real estate market the downward movement in price should be troubling for those considering listing a home.

Of course our media, which takes in tons of advertising dollars from the Real Estate industry, is busy trying to paint the current environment as positive. Naturally sales volumes are up month over month, spring is the busy time in the real estate industry.

The Globe & Mail had this to say in an otherwise bullish article:

The burst of sales may be nothing more than the annual spring surge, aided by unseasonal warm spells in parts of the country. The more telling year-over-year picture was bleaker, with sales down nationally by 13.7 per cent. The national average resale price also dropped to $288,641 - down 7.7 per cent from a year earlier.

Job losses are continuing, hello Conquest Vacations, and it stands to reason that more houses will be hitting the market in the months savings and EI payments (for those who even qualify) peter out.

Garth Turner's blog 'Greater Fool' actually predicted that industry hacks would be at work this past week spinning the bad news straw into gold....they're in the business of selling this straw after all, so its in their vested interest to paint as rosy a picture as possible.

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