The highs and lows of parenting and real estate.

Statistics, Numerology, The Tax Credit and Plastic Surgery

There are some agents out there who spend hours every day combing the statistical data of the MLS in the form of pie charts and bar graphs trying to make sense of the real estate market and their own financial future. It has always seemed a little like Numerology to me. Add each of the numbers in today’s date together until you have a single digit number. Multiply that number by the average purchase price in the previous month and then divide by the median purchase price in the same month of the previous year. Write that number on a piece of paper, throw it in the toilet and pee on it. Hold a pencil attached to a string over the toilet and if it swings in a circle, you’re having a boy and the market will start to improve in the next 6 months. If it swings back and forth in a straight line you’re having a girl and the market will only get worse for the next seven years.

It’s basically psychic hooey, but there’s math involved, so I sort of feel compelled to believe they know what they’re talking about. It’s MATH. You can’t refute math, right? But I’m a typical Number Five, so I have a tendency to be simultaneously skeptical, a naïve believer and embarrassed of myself that I’m naïve. (Just kidding. I have no idea how numerology works. Feel free to send me hate mail about it, though. Only the bloggers who’ve really ‘made it’ get hate mail. One time I got a moderately belligerent comment on a post, so I printed it out and framed it for my office.)

As a subscriber to the Arizona Regional Multiple Listing Service (ARMLS – or ‘armless’, because when you join, they cut off your arms as payment for dues. I’m just saying the fees are steep.) I have access to a database of statistical information and charts and whatnot about the local real estate market called The Cromford Report. It’s actually pretty rad. You can basically pull up a line graph or a bar chart of any information you want about what’s going on with the Metro-Phoenix real estate market. Like really, there are roughly 11,824 graphs. They have whole classes devoted to using The Cromford Report. It’s updated daily by this guy, Michael Orr, who I haven’t met, but I’m pretty sure must have a little bit of Rainman in him. Is it an offensive stereotype to assume that all mathematical and statistical geniuses are autistic? Probably. I’m sure he’s lovely and has excellent social skills. But the point is; it really is like this one guy. Earlier this year the whole system went down for several months because apparently Mr. Orr’s house burned down and that’s where he was doing all of the statistical compiling and where the computers were kept. I find it somehow ironic that such a technical and complex system can be leveled by a house fire. Apparently Fire beats Math, is the lesson there.

I feel like The Cromford Report is a rabbit hole I must avoid getting sucked down into on a daily basis. There is SO MUCH information on there; it’s hard to resist mining it for information on the future of the market. Like I said, though, divining the future from statistical data is sometimes correct, but sometimes wrong; much like guessing. I do think, however, the information can be extremely useful from a learning what happened in the past perspective. For instance:

Copywrite: The Cromford Report

This is a graph representing number of sales in all of ARMLS (closed transactions) per month from 2005 to the present. Each year is represented by a different colored line, with only the current year (2010) calling out actual monthly numbers. I find this graph interesting for two reasons.

1. Even though the years represented here vary wildly (WILDLY, some might shout) in terms of market trends (the peak of pricing and buyer frenzy to the ‘please, someone, take my house I’ll pay you $5 just to remove it from my hands’ selling stagnation) there is a general wave-like pattern with a peak of sales numbers in the May-June region. I’m going to resist the temptation to treat this information as a prophecy (your house will sell quickly if you put it on the market in late spring because that’s when most houses in Phoenix sell! And if you wear the color red on your date, he will fall in love with you and you’ll marry and have 5 children.), but I do think it’s valuable to be aware that in the last 6 years, May-June have had increased numbers of sales, compared to the rest of the year regardless of the market climate (though 2008 did have a spike in September, but we’ll deal with that in a second).

2. 2010 shows the most dramatic, month to month drop on the entire graph between the months of June and July. Although every year except 2008 also shows a drop between June and July, none are anywhere close to the 2208 sales we plummeted here between June’s numbers and July’s numbers.

Now, we’re going to get into a little bit of statistical interpretation here and I warn, you, Rainman, I am not, so please keep in mind this is all my own opinion. THAT SAID (this is like my favorite phrase ever or possibly one of my many writing ticks. I have to restrain myself from using it like 11 times per post), the Niagara Falls-like drop-off of this year seems to fall right in line with the expiration of the home buyer tax credit, June 30. I know what you’re thinking, ‘They extended the credit to September 30! Your logic is flawed! Why am I reading this flawed website bloggy thing!’ (the last part is only if you’re my mother). That extension was largely misunderstood by the public, I think. The rules of this last tax credit stated you had to be under contract by April 30, 2010 and you had to close escrow by June 30, 2010 to be eligible for the tax credit. The extension only applied to the ‘close escrow by’ date. This allowed people who had written a contract on a short sale in April and were just sitting around waiting for it to be accepted between July and September to still cash in on the credit. Basically it helped like 3 people get the tax credit and that was only by accident.

So the point is, if you remove the extension that really didn’t apply to anyone, our sales numbers took the worst dive in one month in at least the last 6 years directly after the tax credit went away. I don’t know about you, but this makes me wonder if it really did anything to ‘stimulate’ our housing market, or if it just artificially inflated it for about 10 seconds before causing it to pop like a plastic dam around Tempe Town Lake. In comparing the numbers to 2009, it looks to me like we were on track to be a little bit higher than 2009 in the early part of 2010 (when the tax credit was in effect) and then we dropped down below where we were in 2009 after it expired (we plummeted like my blood sugar at 3pm after I’ve eaten only Halloween candy all day). Moving forward on that theory, it appears to me that the tax credit didn’t really help or hurt us so much as bunch the sales up into a more concentrated space. I feel like without it, we probably would have matched up pretty evenly with 2009’s numbers.

But who am I to know? Maybe lots of the people who bought wouldn’t have and our sales would have sagged even further. I kind of don’t think so, though. The $8K was icing on the cake for most of the people I worked with. It didn’t make or break them, just made things more comfortable and gave them a sense of urgency.

And finally, going back to the spike of September 2008, I think it’s also worth noting this occurred during another tax credit time period. I’m not sure what that means, or how we should use the information to move forward, but I do know I kind of think the tax credits are like plastic surgery. They change nature, sometimes with esthetically pleasing (Ashley Simpson’s nose), and sometimes with disastrous (Tara Reid’s boobs) results. Extreme caution should be used before attempting them both (and honestly, I’m kind of more of a ‘nature is best’ gal. Although I’m not ruling out a tummy tuck eventually. I have given birth three times, for goodness sake.).

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