Consumers who watch the real estate market like investors watch the stock market -can buy and sell homes like a shrewd day trader.
But as day traders know, it’s not quite as easy at it sounds.
It takes time, practice and patience. You won’t make a killing over night, but over time you will enjoy the security of a roof over your head which can double as an investment with hefty returns.
Track the Market: Every month, follow the five key indicators. Start logging them. Use a spreadsheet to chart them. One or two months doesn’t make a trend. Trends develop over the long term.. At this point you might want to look backwards!
So what are those five key indicators? One indicator alone does not make a trend or a decision to buy or sell. The key indicators to watch are:
· Interest Rates. Rising interest rates have a depressing effect on real estate prices. Falling rates help generate demand. That helps prices go up.
· Building Permits. When demand is strong, builders pull more building permits so they can build and sell homes. Builders reduce the number of permits when demand drops.
· Home Sales. Simple principles of supply and demand affect home sales. When buyers buy prices rise. When buyers retreat so do prices.
· Loan Defaults. Defaulting home owners are having job or money troubles or both. That signals a weakening economy.
· Foreclosure Sales. Foreclosures signal even deeper consumer money troubles and a worsening economy. It also signals dropping home prices.
It might be of interest to note that in some communities inventory is dropping rapidly. Somewhat usual for the holiday season but if the trend continues along with lower interest rates could be an indicator of change to come.
Unforeseen and unexpected events can suddenly throw any market into shooting star or falling star status — earthquakes, war, terrorism, floods, hurricanes, insurance industry pull back, a real estate bubble? Should I add bad loans, bank failures, and wall street greed?
No matter what’s going on in the nation or the world, usually a real estate market that changes over night is rare. Our current crisis has been building over a couple of years with little intervention to curb or prevent our current dilemna.
It comes down to these vital signs -take into account imbalances between supply and demand. What is moving the market. When the demand for housing drops we see existing home prices falling, building permits decreasing and delinquencies start rising and foreclosures will be the last domino to fall. I think we are there!
Watch our indicators for signs of change.
Currently inventory is decreasing due to sellers unwillingness to sell in this “buyers market” , banks willingness to modify loans to help homeowners stay in their home, less foreclosures and available bank sales ( largely due right now to moratoriums)and interest rates decreasing and predicted to continue to decrease.
The most important thing to watch closely is where it is taking prices! It doesn’t matter what is happening. What matters is what direction it’s taking prices.