Should We Act on What We Hear in The News About Real Estate?

We are interested in selling. We look around for comps and set our best guess for a price. And then … nothing. Do we just drop it an arbitrary dollar value regularly until someone bites or is there a better way?

Let’s Discuss…

My goal for a recent article was to see if national or local announcements and issues relating to real estate caused any movements in listing prices. An example would be whether the announcement of the Case-Shiller actually has an impact on the market. Another would be does a report on lending rates moving up or down have an immediate response in the market. What about building permit announcements, unemployment or even the prime rate? Is any of this macro and micro level information even relevant or is it just used as filler in the news hour.

The question I was trying to answer is does anyone that actually participates in the market (sellers, brokers, investors) actually respond to any of these as reflected by price; should they? Since I am licensed in Illinois I am limited to this real estate data which is where I pulled over 11,000 residential properties that sold in Chicago. These properties had over 12,000 unique price changes to analyze with respect to announcements.

Related: Home Prices: Déjà Vu All Over Again?

The Breakdown

The breakdown of the events I looked at to see if the real estate market responded to them is outlined below. I effectively looked at whether these 886 events relating to real estate impacted real estate prices.

The 886 events, which encompassed nearly all that I could get my hands on, did not explain much of anything. In other words the prices in the market were not impacted. The 12,000 unique price changes that I mentioned earlier were simply not influenced by these reports. So why does the media pay so much attention to these figures when the immediate real estate market doesn’t even seem to care?

What Explains 12,000 Price Changes?

I am truly not certain.

My next step is to determine whether it is a geographic issue. In other words do prices ripple out from one block to the next? We all know the significance of location in real estate so my hope is that I can identify patterns based on area. If there are any veteran investors out there, HELP.  If you have an idea on why prices are moving in your area that you think I haven’t considered let me know. I am always up to try and see if the numbers agree.

This post is a rough summary of a recent article.  If you are having trouble sleeping you could read the full 20+ page article I had published on this.

You may be asking why I waste my time on this type of work but the reason is two-fold.  The first is that I have been an active investor for the past 10 years, and I am always trying to see what’s missing and if profit can be made with better information and analysis. In other words I am always looking for ways to monetize findings. The other reason is I “have to” as an academic.

What are your thoughts? Let’s discuss in the comments below…