The State of the Nations Housing
Ok, so out of Harvard comes some interesting information. A study published recently on the state of the nations housing for 2007 leave more questions than it answers them. Words like “it will depend” and “If builders par down” etc. left me wondering what good they really came up with in this study.
Let me provide some facts that they did come up with.
* Housing afford ability continues to be a major problem. What does that mean? Well in lay mans terms it means people don’t have enough money to pay their mortgages if they purchase a property. And it means that many will never qualify for a mortgage to start with. Overheated home prices, rising interest rates, tighter lending practices, and in some markets declining incomes all add to this lack of afford ability.
* “The down turn is in full swing” Yep that what it says and it took the Harvard people to let us know that!!! They did finally peg the start of the down turn right however. They put it during the last quarter of 2005. Which means we have been in that down cycle for 1.5 to 2 years now. in fact 277 major housing markets have registered this down turn. The downturn includes a decline in home prices and a decline in new homes being built. The number of VACANT homes on the market jumped by on half a million between the end of 2005 and 2006. This number is expected to reach 1 million this year.
* Federal subsidies to assist buyers and renters is not keeping pace and is of little effect. Once again, it to Harvard to let us know that.
* Continued risk to lenders will keep pressure on lenders to keep their underwriting standards tight which will keep many buyers out of the market. There is no loosening in sight for sub-prime borrowers who today were the A- and B borrowers of yesterday.
* Foreclosure rates are seen to continue to grow but as we mentioned above they would not venture a guess on when this trend would reverse.
With all of that information and my experience watching the housing market I tender the following:
* The tried and proven way to know when to invest and what exit strategy to be used is to have in your bag of tools, all the knowledge of structuring deals that you can have, and to study and graph each individual market you intend to invest in for the last 15 to 20 years. Markets trend and they follow those trends. If you will graph them, you will see that I am correct. You can know where the market is and be able to time your purchases and sales or refinances to take advantage of these trends.
* All of the Harvard (and other studies) forget to to look at trends. They look to the futures trying to guess what is coming, or in this studies case not guessing at all, but they have overlooked the simple easy way to forecast and that is to look at past trends as well as dynamics in the market now. Don’t you make that mistake!
I will offer my short story. I will tell you that as I graph market trends and look to any dynamics acting upon any individual market, I have been able to be fairly accurate in knowing what the timing of each market is when I enter and when I leave. It has worked for me and I believe will work for you.
Cary Beagley
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