Existing home sales increases at biggest rate in 3 years… what does this mean?
As you may have heard, existing home sales have risen by 3.9% in Feburary… THE 
BIGGEST RISE in 3 years!!
So what does this mean? Does it mean that we have seen the proverbial bottom of the pit and are due for another bull market in real estate?… Or just that this new statistic looks promising and is heavily negated by the other statistics such as rising inventories?
Well, some say that we have seen the bottom and will see healthy markets in 2007… I just don’t buy it.
Here’s why:
Ya, existing home sales are steadily rising, but they are only one aspect of a more complicated housing market. The housing market is made up of existing home sales and new home sales. New home sales have dropped off lately and we have seen builders cut prices and add nifty perks to buyers to get them off of their books. While new home sales have dropped off, according to Scott Stoddard of Investors Business Daily inventories are piling up. They jumped up almost 6% in February alone to $3.7 million (it will take almost 7 months to sell off those homes at current prices!!).
It’s kind of a give and take. More people are buying existing homes and making that statistic look nice… while builders are still building record numbers of homes, which are sitting on the market longer. A key statistic to note is that housing starts are up… but permits for SFH’s (single family homes for the newbies out there) have dropped to a 9 year low! This shows that builders are trying to get their current projects complete and off of their hands and looking elsewhere other than residential single family housing for their next projects because they lack confidence in the market.
Couple ALL OF THAT with the looming record foreclosures and less buyers (as a result of recent sub prime tightening) for those homes, prices are sure to keep trending downward or stagnant.
Another possible cause according to the National Association of Realtors for the recent increase in existing home sales is the early spring-like weather in some parts of the country such as the NE. Homebuyers like to look at homes and move in nice weather, so many of them are taking advantage of the early spring weather and still good conforming financing rates to move on up in the world and get a nice home before something else happens in an unpredictable real estate market.
What does all of this economic speak mean? In my opinion, the housing market in the U.S. in general hasn’t hit the complete bottom yet. We are on the verge… but not quite touching the depths of the graph yet. Of course, the beauty of real estate is that national statistics really don’t matter a whole lot. There are still some smokin’ markets out there that savvy investors are pouring money into and reaping great returns.
So, if you are selling your home and thinking that you will get top dollar like in years past… GET REAL!. You just won’t get top dollar on the average home because there will be so much housing to choose from for homebuyers. It is a buyers market and will be for quite some time. Inventories are piling up, foreclosures are rising— resulting in more inventory, and there are a few hundred thousand buyers out there because of tightened financing standards.
Sellers…. do something to make your property stand out or settle for less cash in your pocket.
Investors…. find those hot markets and shift your investing to them. There are always hot markets, so don’t complain that real estate investing just won’t work right now. Do your research (use our extensive market research area) and stuff more money in your pocket when everybody else is complaining of a crappy market.
To make it easy for you, I will do some research of my own and do a posting with some hot real estate markets to look at. Keep checking back… you won’t want to miss it.
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Hey, my name is Trevor and I'm the founder of The REI Brain and a real estate investor since the age of 21. Right now, my focus in real estate investing is multi-family income properties and I have plans on moving more into the commercial real estate investment world in 2008 and beyond. 
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