A New Year for Real Estate Indicators
With the country recovering from the most significant real estate crisis of our generation, some folks are still skittish when it comes to real estate. But owning and investing in real estate does not have to be guess-work. In fact the crisis was not because these indicators didn’t work, it was because they were largely ignored.
Whether you own a home and are wondering when its value will recover or are considering buying, there are tools we refer to as “indicators” that can help guide these important decisions. Indicators in general allow investors remove emotions and speculation out of investing. Among the most useful real estate indicators are;
Home sales, which is exactly what it sounds like, basically how many homes in the area you are looking at have sold within a certain recent time period;
Home prices, which is also what is sounds like, how much are homes in the area you are looking at selling for within a recent time period; and,
Because they are still affecting prices, home foreclosures. In other words, how many home are currently in foreclosure or being held as REO inventory in the area you’re looking at and within recent time period.
There are many resources available for real estate indicators, but among the most popular are the National Association of Realtors Existing Home Sales, the Case Shiller home price index and Realty Trac foreclosure market reports. NAR also releases a home prices, reports the percentage of sales that are “distressed” meaning foreclosures and short sales and can fill you in on housing inventory, which is helpful in predicting future home prices since the less inventory, the more folks will have to pay. Doing your homework when it comes to real estate is easier than most other investments. All of these resources are free and easily available on the organization’s web site. You can even find the release dates for these indicators and mark your calendar so you can keep as up to date and current as you’d like. Most of them come out monthly and then release additional quarterly compilations. And most express the indicator in terms of the change from last month, quarter or year. So, for example, home sales may be reported as being up by 3% month over month and 5% year over year. What you want to look for is that positive, upward trend in sales and prices and of course a downward trend in foreclosures, in whatever geographic area you are interested in.
So what are the indicators indicating?
Sales: Nationally, even with hurricane Sandy, home sales are up almost 11% since this time last year
Prices: Home prices are up too, by over 11% since this time last year. Just as important, home prices have been up for at least eight months in a row now which we can confidently call a trend. That’s big news because that increase translates to $760 billion in home price equity (each percentage point of price appreciation translates into an additional $190 billion in home equity).
Foreclosures: Foreclosures are measured in terms of loans that have defaulted, new foreclosures actually filed and foreclosures completed and sold. One thing we’re still seeing from the indicators is that foreclosures are highly depending upon which region you’re looking at. New foreclosures starts are in general are down 28% from last year. But 9 states posted highs in foreclosure including Florida, New Jersey, New York, Ohio and South Carolina. In fact, Florida posted the nation’s highest state foreclosure rate for the third month in a row, with one in every 304 housing units with a foreclosure filing in November, followed by Nevada, Illinois, California and South Carolina. Some of these are also the states where there are the most foreclosure sales. For example, foreclosure-related sales accounted for at least 20% of all sales were Nevada (31 percent), Florida (26 percent), Illinois (24 percent), Michigan (24 percent), and Colorado (20 percent). So this is bad news for some folks, but a good opportunity for others.