09
2009
Real Estate Looking Up? Comparing Home and Apartment Queries
Last months release of April real estate figures indicates an uptick in the market. Existing home sales of 4.68MM for April were up 2.9% compared to March. New home sales registered a very slight increase of .2% or 352,000 new homes for the month. Even though housing starts were down a dismal 12.8%, when you pull out multifamily dwellings, single family homes actually showed an increase of 2.8% for April.
As we’ve shown in the past, search data around the real estate market can help us figure out market direction. Based on the assumption that most home buyers in today’s Internet age start their home purchase mission online, searches for terms such as “homes for sale” should correlate to the NAR Existing Home Sales number.
Here’s a three year chart on search volume for “homes for sale”:
While we saw a promising uptick in home purchase related searches earlier this year, over the last two weeks that upward trend seems temporary. In the past, we found it very illuminating to examine the competitive substitute of apartment rental searches alongside home sales purchases to get a better sense of rent versus buy consumer sentiment.
In March this year we saw another promising signal, the drop in “apartments for rent” searches compared to “homes for sale.” Unfortunately, over the last two weeks apartment searches have surged counter to the drop in home sales queries. Looks like April’s positive outlook may be short-lived.
It would be interesting to know if searches for “homes for sale” really do correlate with existing home sales. Might be a lag, but seems like you could plot the numbers.
Maybe there is no correlation. Maybe people just like to get on the Internet and see what’s out there when the housing market is hot. They get swept up in the excitement, even if they don’t really have the means to buy.
In a down market, maybe people search for homes when they hear that prices are tumbling. But maybe they can’t get a loan right now, or they remain reluctant to buy because they are afraid prices still have a ways to go before they hit bottom.
You would think that a greater percentage of people who are searching for apartments really are looking for a new place to live — it’s just not as much fun to fantasize about an apartment that’s beyond your means as it is to imagine owning a home you can’t really afford.
But some apartment searches may be by people who are researching rents to see if they can get a better deal than they have now (kind of a reverse “make me move” for renters).
Those who are actually looking for an apartment may generate more searches when vacancy rates are low and it’s difficult to find a place. When vacancies are high, you might see the ratio of searches to lease signings drop, because it’s easy to find a place.
There are so many confounding factors, seems hard to draw any meaningful conclusions from a comparison of home vs. apartment searches.
Just remembered Heather Hopkins did compare the frequency of searches of “homes for sale” and sales of existing homes and found a “very strong correlation.”
http://weblogs.hitwise.com/us-heather-hopkins/2008/04/internet_searches_match_declin_1.html
But that was more than a year ago. Both searches and sales were on the decline at the time. Be interesting to see if the correlation is still as strong — you would think searches might have picked up more than sales since then.