Home sales are rising so why are home values still falling?

If you have been watching the news lately you have no doubt been hearing the media outlets spin real estate related stories into positive news. As a result, most people are wondering if home sales are up then why are home values still falling? The simple answer is rising unemployment. For example, Florida's unemployment rate has risen to 11.5%. This translates into more than one million Floridians out of a job. So, if half of those unemployed were able to get jobs and ten percent of those purchased a home, that would equate to 50,000 home sales. As you can see, until we figure out a way to put people back to work, home values are going to continue to fall.

So, what about the soaring home sales? The Florida Association of Realtors reported that there were 707 re-sales in Broward County in November 2009, a 39% increase from a year earlier. In other words, 200 more homes were sold this November than last and the news headlines were "Home sales skyrocketing!" What I find more interesting is what the media failed to include in their report. The fact that there were about 7,500 listings in the Broward MLS and less than 10% of homes available for sale were actually sold.

While an increase in home sales is positive, it is equally important to put things in perspective and to understand what is really happening. Unfortunately, with more people out of work, means that more people will be unable to afford their homes. This is going to increase the inventory of unsold homes which will continue to push down values.

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