There’s an old axiom among data analysts that 99 percent of all statistics tell only 49 percent of the story. That’s especially true when slicing and dicing housing data.
Recently, a slew of articles has appeared in publications such as The Wall Street Journal and Bloomberg Business expressing concern about the “cooling” housing market. They cite national statistics which indicate that existing home sales have fallen for five out of the past six months and that new construction sales have fallen to their lowest pace in eight months.
While national housing data may serve some statistical analysis purpose, it is rarely an accurate tool in measuring the performance of any local market. Certainly that’s true of Lafayette Parish’s overall housing market this year.
While Lafayette’s first-quarter sales reported to the Realtor Association of Acadiana’s Multiple Listing Service were lackluster, falling by 3 percent from last year, the last four months’ pace has been nothing short of torrid. Homes sales from April to July bested those of the same period last year by nearly 17 percent.
As of July 31, Lafayette’s seven-month increase in home sales over last year is more than 9 percent, with the dollar volume of those sales up by 15 percent.
Even within a specific market, overall numbers rarely paint the whole picture. Supply, demand, areas, price ranges, new construction sales, existing home sales — all have their story to tell, and often it’s not what the overall numbers indicate.
For example, as noted, Lafayette’s overall home sales through July are up by 9 percent. But one slice of that — new construction sales — is up by less than 6 percent, while sales of existing homes rose by over 10 percent.
Looking even deeper, new construction sales between $150,000 to just under $300,000 are up nearly 8 percent, while those above $300,000 are even with last year.
A plausible explanation is that upper-priced existing homes on the market tend to compete better with new construction in both amenities offered and cost. Existing homes in the midrange tend to lack the features found in new construction.
For existing homes, sales in the midrange of $150,000 to $300,000 are up by almost 13 percent, and those above $300,000 rose 32 percent.
But as good as the numbers are (and they are), the inventory of homes on the market has grown by nearly 13 percent since last year. Is our market in balance? In all price ranges? They rarely are.
Housing experts generally agree that a demand/supply absorption rate of six months indicates a market in balance. The more a month’s supply rises above six months, the softer the market is for sellers.
Conversely, the further the supply falls below that mark, the more it suggests a market has more buyers than homes to satisfy them.
Currently, we have a 5.9-month supply overall. In the midrange, it’s 5.4 months — the same as last year. In the upper end, we have a 10.8-month supply, but that is down from 11.7 months last year.
The deeper we dig, the more we understand and the better our questions become. And from those questions come better “whys.”
My goal in this and future columns is to not only report on Lafayette’s overall housing numbers but to go deeper into the subsets of the market such as inventory and demand in various price ranges, what’s selling and where and, perhaps, even try to answer a few of those whys.
As our rich oil industry heritage has taught us: To get to the payload, Cher, you’ve got to “Drill, baby, drill!”
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