Navigating the Housing Market Maze

ALERT: Existing home sales surge 9.4% in September.

Why is this happening?

This implies that the current housing inventory is being bought up much faster than anticipated, which also this strengthens my belief that housing prices will turn around sooner than expected.

Maybe the surge has something to with the tax credit incentive to buy ending soon next month, or maybe something to do with the cyclical nature of the housing market tending to pick up in the Summer and Fall months.

This is a result of a combination of factors. The dollar's beating of the past several months is one of those factors, the dollars decreasing strength is creating higher demand from foreign buyers for our real estate, at an extra premium to the already discounted home prices from the real estate crisis.

The home-buyer tax credit coming to an end soon, a double-digit year-over-year home price decline, and slightly increasing consumer confidence in the housing market are all also contributing factors to the nice increase in existing home sales. Also, personal income in February of this year (nearly exactly when existing home sales started rising from their triple bottom base) hit its highest level since 1995, and personal income has been steadily rising since.

So where are we headed from here?

After analyzing some data, news, and a variety of other housing market conditions, we believe the housing market is headed:

• Up from here for quite some time; our projections are for an increase of 1.6% in September for the Case-Shiller 20 Index.
• Nationally we expect 3'rd quarter home prices to rise 7.03%, for an increase to 142.67 in the national Case-Shiller index.
• More importantly our 4'th quarter 2009 projections are for an increase of 5.6% in the national Case-Shiller home price index.
• In general, you can expect a 5-8% increase in national home price values over the next several months. (call us for more information on where the best performing areas of the country are, and the areas where the outlooks are the best)

Why do we believe this?

After analyzing the housing market in late 2008, I called a bottom in home prices to come in Spring, 2009; as it did. For those same reasons that I called the bottom to come as it did, we still hold our belief that the bottom is in. We believe this for many reasons, here are just a few of them:

1. Interest rates and mortgage rates at their lowest in decades,
2. Housing starts and building permits down 30% and 32% year-over-year, which will help spur demand for the excess inventory rather quickly,
3. Steadily rising personal income projections for the rest of 2009 and all of 2010,
4. While observing the correlation between existing home sales, new home sales, inflation, and home prices we found that:

• Home prices turn around several months after existing home sales increase and develop an uptrend. Our current uptrend in existing home sales started in February, 2009 which suggests a turn around in prices, according to this historical trend for the last several decades, around April, 2009- June, 2009.

      5. Using statistics, probability, quantitative financial methods, and factoring in macro-economic conditions that should affect the housing market in the near term.

There are a variety of other reasons we believe the housing market outlook is good from here, and there has been extensive research put behind those reasons. However, I do not want to write a book here, but want to give you a little guidance day-by-day and help you have a greater understanding of current market conditions and forecasts. Also, after posting market analysis, research, and outlooks I would like to give you some advice on how you can take advantage of those conditions.

I hope this brief overview and post of the housing market can help you gain more confidence when considering a real-estate investment for this time. At least for the medium-long term we suggest this is a great time for you to seize the opportunities that are out there currently in real-estate. On the next post we will discuss one investment you can make which is usually the leader of the pack in real-estate, hands-free, low-fees, and you virtually have others working for you.