Evidence that we have reached the bottom in the housing market

I had the privilege of watching Richard Smith, President and CEO of Realogy Corporation, speak about the status of the national real estate market while attending the Sotheby’s Leadership Conference this past week.

Realogy Corporation is a global provider of real estate and relocation services and has a diversified business model that includes real estate franchising, brokerage, relocation and title services. Realogy’s world-renowned brands and business units include Better Homes and Gardens® Real Estate, CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®, The Corcoran Group®, ERA®, Sotheby’s International Realty®, NRT LLC, Cartus and Title Resource Group. Collectively, Realogy’s franchise systems have approximately 14,400 offices and 264,000 sales associates doing business in 99 countries around the world.

Over the last several years, we have all seen the massive amounts of data that has been discussed in the media regarding the health of the real estate market. Prices have been up, down and supply has shown months of improvement only to retreat several months later. Mr. Smith explained that some of the most compelling research came when his organization began analyzing normal turnover in the housing market before the bubble that occurred in 2005.

The research found that turnover in the housing market during a normal year is about 4-5%. Turnover happens in many instances such as change in employment, death or divorce, along with a many number of factors that causes someone to need to purchase a house.

In August, total existing homes sales revived by 7.6 percent to a seasonally adjusted annual rate of 4.13 million units, up from an upwardly revised 3.84 million in July, but the new pace was down 19.0 percent compared with August 2009 sales.

So what does all this data mean? According to the US Census Bureau, there are approximately 78 million homes in the United States. At the current sales pace of 4.13 million units, we are at approximately 5 percent turnover and have remained around this number for several months.

We will need to see several months of improvement before we know if the bottom is solid, but this is good evidence that we are on the path to recovery.

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