Has the Housing Market hit bottom? There is a ray of hope on the horizon.

Has the Housing Market hit bottom? There is a ray of hope on the horizon.

The question that has been on the lips of real estate investors and homeowners alike is “Has the real estate market hit bottom?” It can rightly be said that we have made steps in the right direction with the release of the Pending Home Sales Index report on August 29, 2012.  I was very excited when I saw the numbers and could not wait to write about it. Read on to see why it matters to real estate investors.

The Pending Home Sales Index – What is it?

The Pending Home Sales Index was developed by the National Association of Realtors and is the leading indicator of housing activity and. Its purpose is to indicate existing home sales but not new home sales. If for example, if a contract is signed for the sale of a home but it is not yet closed, it is rated as pending. Under normal circumstances, it takes between four and six weeks to close such sale.

There is a relationship between housing and the general state of every given economy. It serves as an indicator for economic turning points.

 “A sharp drop in housing demand typically acts as a warning signal of economic slowdown. Buyers are reluctant to purchase houses when interest rates are high, disposable income is low, or consumer confidence is low. Conversely, a rebound in the housing market is often a leading indicator of an economic recovery.”

What happened to the Pending Home Sales Index in July?

The latest good news out of the housing sector is a 2.4 percent rise in the pending home sales index, a gain that points to further improvement for existing home sales. The year-on-year rate of plus 12.4 percent is the highest in nearly 2-1/2 years. Regional data show gains in 3 of 4 regions led by the South which is the largest region. Sales of existing homes have been trending higher for the last year though gains have been slightly lagging those for new homes.

 

Prior

Consensus

Consensus Range

Actual

Pending Home Sales Index – Level

99.3 

 

 

101.7 

Pending Home Sales Index – M/M

-1.4 %

1.0 %

-1.5 % to 3.5 %

2.4 %

 Released On 8/29/2012 10:00:00 AM For Jul, 2012

According to the statement released by the National Association of Realtors, “Pending home sales rose in July to the highest level in over two years and remain well above year-ago levels. The index is at the highest level since April 2010”, says the chief economist of the National Association of Realtors, Lawrence Yun. He also said…

While the month-to-month movement has been uneven, we now have 15 consecutive months of gains in contract activity. All regions saw monthly increases in home-buying activity except for the West, which is now experiencing an acute inventory shortage.”

With the existing home sales projected to increase by 8 or 9 percent in 2012 and 7 to 8 percent in 2013, it becomes an indicator that there will be up to 10 percent increase in home prices over the next two years.

Why do Investors Care?

The Pending Home Sales Index is an accurate gauge of both the demand for housing and the economic momentum. How is this? Simply put, “this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments.”

With the economic backdrop being the major influencing factor on financial markets, the output on home re-sales is directly linked to stocks, bonds and commodities. This means that the trends recorded in current home sales data should serve as indicators to mortgage lenders, home builders and home furnishing companies.

Yun, of the National Association of Realtors, goes further to state that…

“Falling visible and shadow inventories point toward continuing price gains. Expected gains in housing starts of 25 to 30 percent this year, and nearly 50 percent in 2013, are insufficient to meet the growing housing demand.”

Sound Financial Enterprise, LLC

PO Box 8611, Tacoma, WA 98419

Phone 253-215-4115;

http://soundfinancialenterprise.com/home.htm

http://www.facebook.com/#!/gordon.macdonald.3745

Graphic, excerpts and quotes from the following sources:

http://mam.econoday.com/byshoweventfull.asp?fid=451716&cust=mam&year=2012&lid=0#top

http://www.dailyfx.com/calendar/

http://www.realtor.org/news-releases/2012/08/july-pending-home-sales-rebound

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Million-Dollar Forclosures – The Rich are Walking Away

Million-Dollar Forclosures – The Rich are Walking Away

Since the housing bubble burst five years ago, there has been visible increase in the number of wealthy American families that are losing their homes to foreclosure and in most cases, such foreclosures are said to be mostly voluntary.

From the report put together by RealtyTrac, an outfit geared towards tracking foreclosures, more than 36,000 homes worth about a million dollars were either foreclosed or served with a notice in 2011. Although the percentage falls below 2% of total nationwide foreclosures, it is higher in comparison to preceding years.

According to the vice president of RealtyTrac, Daren Blomquist, “These properties are accounting for a bigger piece of the foreclosure pie.” This can be seen from the report that among the foreclosed properties, there was 115% increase in foreclosure of properties that are valued at a million dollars and above beginning from 2007. The percentage is even higher in the case of homes that are valued at $2 million and above at 273%. Such cannot be said of the homes valued between $500,000 and $1,000,000 since their foreclosure rate reduced by 21%.

It would also interest you to know that a lot of homeowners within the multi-million dollar range were until recently, able to postpone every process that has to do with foreclosure of their properties. According to Blomquist, “they had more financial means to hold out against default.” It was also determined that those homeowners who made fair deals with the lenders were the ones that had other means of income, according to the President of Esslinger-Wooten-Maxwell, a Miami-based real estate firm, Ron Shuffield. It is also reported that 9% of the total foreclosures recorded last year in Miami was represented by properties valued more than $1 million.

Saddled with bloated mortgages after a long run up in property values, many high-end homeowners have chosen to pursue a “strategic default.”

But with a recovery in the housing market still years away, foreclosure has turned out to be a worthwhile option after all. Saddled with bloated mortgages after a long run up in property values, many high-end homeowners have chosen to pursue a “strategic default.” Even though they can afford the monthly mortgage payments, they still decide to walk away from their home because they owe more on the property than it is worth.

According to a national real estate and mortgage expert with Wilshire Holding Group, a Florida-based real estate firm, Stuart Vener, “In the lower-priced houses you’ll see more people defaulting because they can’t afford the payments and it’s a choice between feeding their family and paying the mortgage on a home that’s under water.”

“In million-dollar homes, you’re looking at people who can afford it, but they have to make a business decision: Does it make sense to make payments on a mortgage when the home is worth less than they owe?”

He goes further to say, “In million-dollar homes, you’re looking at people who can afford it, but they have to make a business decision: Does it make sense to make payments on a mortgage when the home is worth less than they owe?” In most cases, it has been said that the best financial decision to take in such cases is just to walk away. According to Blomquist, foreclosures take up to 348 days to be completed, the homeowners have enough time to pack up their belongings and leave. This is just equal to a whole year of free housing for the owners of such foreclosed homes.

Blomquist further states that the fact that a few houses were foreclosed within a given wealthy neighborhood does not in any way have any negative impact on the values of the surrounding homes. Vener says, “You’re not going to see the weeds growing.” He goes further to state that on the other hand, foreclosed homes are an opportunity for real estate investors to make good bargains. He sums it up this way, “In a good way, this is going to drive turnover.” 

Contact Sound Financial Enterprise, LLC for more information about your housing needs.

Sound Financial Enterprise, LLC

PO Box 8611, Tacoma, WA 98419

Phone 253-215-4115;

http://soundfinancialenterprise.com/home.htm

http://www.facebook.com/#!/gordon.macdonald.3745

First Published: February 23, 2012: 5:54 AM ET

By Jessica Dickler @CNNMoney February   23, 2012: 10:09AM ET

Article found  at: http://money.cnn.com/2012/02/23/real_estate/million_dollar_foreclosures/index.htm?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29