Give and Take: Data Is Baffling on Home Sales

Analyzing the housing market can turn into a complex numbers game. The problem is figuring out which numbers provide the most-accurate information.

May, for example, was a time when most observers thought the housing market in San Diego County was booming compared to May, 1985.

Insites, a firm that monitors the housing industry, reported that 1,899 new homes and condominiums were sold in May, a 25% increase over May, 1985.

But data compiled by Safeco Title Insurance Co. presented a more dismal view of the housing market. According to Safeco, recordings of new homes in San Diego County in May dropped 15.5% compared to the year before, and recordings of existing homes tumbled 12.4%.

Likewise, the San Diego Board of Realtors reported a slowdown for this May--610 existing homes were sold, less than half of the sales the year before.

On the surface, it appears as if someone’s figures are wrong.

In truth, each survey measures a different part of the housing market at a different time.

Insites measures current sales activity only in new residential developments, according to President Stephen Bottfeld. In May, the firm surveyed 319 new housing projects in the county.

Current activity is defined as any action that removes a unit from the market; it could be an accepted offer to purchase the house or a “reservation” to buy with a deposit of at least $500.

Insites publishes the results of its survey 11 days after the close of each month. Timeliness, Bottfeld said, is extremely crucial to Insites’ subscribers, who include real estate developers, financial institutions, appraisers and utilities.

The survey, which breaks the county into eight areas, includes information on prices and amenities of the projects.

Developers want this data so they will know how well--or poorly--their competition is doing with what types and sizes of homes. This helps them in pricing and in making decisions.

Financial institutions must be aware of the market so they can better evaluate loan requests.

Appraisers need to be able to provide these institutions with updated advice.

And utilities, such as San Diego Gas & Electric and Pacific Bell, need to plan how many residents will need their services.

But Insites’ figures provide only one perspective of housing market activity.

The Safeco survey of the number of recordings is important because it shows how many of the units removed from the market actually became final sales.

For example, if interest rates rise after an escrow is opened, the consumer may decide not to buy, and the home may end up back on the market.

Eventually, this also would show up in Insites’ survey, if projects began reporting “negative” sales rates as the number of homes returning to the market exceeded the number removed.

Safeco’s survey is also important because it includes final sales of new and existing homes. Insites only surveys new homes.

So why did Safeco’s May survey indicate a decline in deeds recorded compared to the year before?

First, there is normally a lag between the time an escrow is opened and when it closes, explained Denis V. Rottler, vice president and manager of Safeco’s San Diego office.

Second, this lag has more than doubled in the past year to about 100 days because homeowners are refinancing their loans in record numbers to take advantage of lower interest rates. The flood of refinancing applications has slowed the escrow process for everyone.

Although these homeowners must go through the escrow process and use the services of a title company, these refinancings do not count as an official sale of a home.

So, although Insites is showing an increase in the number of homes removed from the market, they aren’t becoming final sales for three months or more.

However, refinancing activity is slowing, and the length of time needed to close an escrow is decreasing, Rottler said.

Deed recordings of homes in June reflected the boom in the market--the number of resales rose to 3,826, up 30% from the prior June, and new-home sales increased to 1,462, up 19.1% from June, 1985.

The San Diego Board of Realtors also reports area activity, and for May its survey seemed to indicate that sales of existing homes were half of the number sold in May, 1985. These numbers are difficult to use for a number of reasons, however.

“Sometimes, our members are slow in reporting sales because they are busy selling homes,” said Karen Rountree, director of communications for the board. So the 610 homes that the board shows were sold in May, 1986, will end up being much greater when the tally is complete, she said. Last May’s number initially was 670 but rose to 1,255.

Another limiting factor in using the board’s numbers is that they include only existing homes sold in San Diego, the South Bay and East County. Other realty boards collect data for their respective sections.

The number of new-housing permits is another important barometer of housing activity.

This May, 3,473 permits for new housing units were issued in San Diego County, down 14% from the May, 1985. That number includes single-family homes, condominiums and apartments.

This decrease could signal a slowdown in the pace of the housing market. However, it is difficult to generalize from only one month’s figures.

These 3,473 units won’t be for sale or for rent for one year--the length of time for construction--and they won’t show up in the surveys until next May.

At first, Insites will count them once they are removed from the market. Then, when they become final sales, Safeco will include them in its data.