It is human nature to want to know what’s coming. We can tolerate just about anything by believing that our situation is bound to get better. If we have some idea about when it’s going to get better, we can tolerate even more. Our desire to plan and forecast is so hard-wired into us that legions of people are employed to analyze data and make predictions. A lot of times those predictions prove to be wrong — for any number of reasons — but lacking anything else, we’ll live with the predictions we can get.
Our economy, of course, relies heavily on real estate, so the economists and politicians keep a close eye on the sales figures to help determine where we are in the ups-and-downs of market turmoil. The problem with using sales figures is that the numbers are old by the time we know what they are. The market adjusts quickly, but we don’t necessarily see it as it happens. To get around this, we have developed a system of predicting what the sales figures might turn out to be in the future. These predictive data are called “leading indicators,” because they indicate what the final result might be, and they are ahead of those results.
A good indicator of what sales might be is the number of properties under contract. Another might be the number of properties being placed for sale in the market. We can also look at the number of building permits being issued. Like new listings, building permits show a level of confidence in the market. If those numbers are improving, they lead us to believe there is a growing confidence among buyers and sellers that properties will sell in a reasonable fashion, and so future sales will also improve.
To figure out the leading indicators, just start at the end, and work your way backward. Sales volume is the number we are after. Before there are sales, properties go under contract, and before that, buyers need to look at houses. I don’t believe that there is a national calculation of the number of home showings*, but the service we use at Equity Colorado keeps a tally for the local market. They also try to keep track of what is going on that might have an affect on the number of showings scheduled on any given day.
Today, the weather in Denver was quite cold with a threat of snow. It was heavily overcast and even foggy all day. When we have weather like this, we usually see a decrease in the number of showings. Today, however, the number of showings was almost 15% higher than last Friday. It was the best single day since last April, when the tax credit was in full swing.
Obviously, one great day does not a recovery make, but this just might be an indicator that things are indeed looking up.
*EDIT: There is a report that shows national statistics for home showings. It is called the “Foot Traffic Report,” and is compiled by the National Association of REALTORS.