The economic news has been wild recently with GDP soaring, consumer confidence down, and the federal reserve holding monetary policy (interest rates) steady. It is challenging to decipher what is actually going on with the economy with so many mixed messages. With all the noise, it is important to focus on leading indicators as opposed to lagging indicators (like GDP). One interesting leading indicator is painting an ominous picture for the real estate market. What is the metric? Why is this more important than other metrics?
What is the indicator painting an ominous picture for real estate?
Showingtime, a company focused on scheduling residential real estate showings for realtors and local multiple listing services began tracking the number of visits (showings) or residential real estate in 2014. The metric tracks the number of house visits in each of the four regions and compares this to prior periods. These are actual visits scheduled with their app.
On the flip side the National association of realtors also puts out a monthly “survey” of buyer traffic. They ask respondents: Compared to the same month (January) last year, how would you rate the past month’s traffic in neighborhood(s) or area(s) where you make most of your sales?” The NAR report is based on how realtors “feel” about the market. I can tell you that I can’t remember the number of inspections I did last year in January. The data from the National Association is useless as it is feeling driven as opposed to actual data driven like the showingtime index.
Why are the number of showings important?
Property showing data stands as a leading indicator of market demand. The more showings would be indicative of more demand and more sales since people look at houses prior to purchase. Showings is one metric to try and track the “traffic” visiting residential real estate properties. The less traffic, the less sales.
What is the indicator telling us?
Nationally showings are down 7.2% with the Western region down 17.2%. This is the eight consecutive month that showings saw a drop.
Why is this problematic?
According to the national association of realtors, showing traffic is a leading indicator by 2-3 months of sales. The recent declines in March should show up in a decrease in May/June sales. With national showings down 7.2% this would lead to a decline in sales in one of the historically busiest sales periods in residential real estate.
While the recent GDP numbers blew away expectations, it is interesting that consumer confidence is waning which is likely leading to a decrease in showings. The decline in showings could be our first glimpse of what is to come this spring season as it shows a decline in demand and ultimately less sales closing in the coming months. I suspect this lack of demand will lead to a flat/ slightly declining real estate market that will ultimately flow through to the rest of the economy.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Fairview is a hard money lender specializing in private money loans / non-bank real estate loans in Georgia, Colorado, Illinois, and Florida. They are recognized in the industry as the leader in hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide. To get started on a loan all they need is their simple one page application (no upfront fees or other games).