Four Key Housing Trends Critical To Market Awareness
So many different news agencies report how the real estate market is doing, yet few offer usable information that can help us determine the real direction of the market. Inventory flow tells us whether the market is picking up speed or if it is slowing down, and these four key housing trends will give you a market awareness to help guide you in your real estate investment decisions.
Four Critical Housing Trends
The easiest way to track the real estate market is to watch four critical housing trends. This simple tracking, over time, will give you all the insight you need to know whether prices will be rising or falling, and whether now is the time to buy or sell.
- New Homes Listed - Simply measure the number of homes that are coming onto the market. This includes new home listings as well as homes that are re-listed after they "fail to sell" under a previous listing contract.
- Failed To Sell - When a home listing leaves the market without actually being purchased by a Buyer, we refer to these listings as a "fail to sell." Whether the home runs through the entire course of the listing agreement without being sold "expired," or if the seller changed her mind "cancelled," tracking failures is a very important part of the housing trend analysis.
- New Pending Sales - Homes that have recently come "under contract" do not actually affect the current inventory of homes, as they have not left the market, nor have they added to the number of homes on the market. However, they are still critical because over time the number of homes that are sold is always going to be a subset of the number of homes that have previously come under contract. The "pended" trend allows us to roughly predict the future sales trend.
- Sales - The number of homes that successfully sell each period is the one stat that everybody seems to report. While this is the most important of the four key housing trends to track, it can be greatly enhanced by following the three other trends previously measured.
Tallahassee Housing Trends
We can observe the four key housing trends in a real world example from the Tallahassee real estate market.
With new home listings falling and failures on the rise, we are seeing inventory reducing for the first time in years. Additionally new contracts and sales have leveled off and are actually starting to recede (normal seasonality), so I am concerned that inventory reduction might slow for the next six months or so. By keeping a close eye on these trends, we will know what is happening in the Tallahassee housing market.
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Greg, I have been wondering the same thing. I suspect we will see quite a bit of turmoil in the short run, but the long run we will see recovery and some new entrants in the banking industry.
The mortgage market is so fluid and so lucrative that I suspect we will see the new entrants pretty quick, thus I don't think the housing market will be "far worse," but rather pretty much in line with the downfall that we have been estimating. But time will tell...
I wonder what effect the Wall Street unrest (to put it mildly) will have on the Tallahassee real estate market. Consider the following excerpt:
Oppenheimer analyst Meredith Whitney said Tuesday that the dissolution of Lehman Brothers and the takeover of Merrill Lynch could contribute to a significantly sharper fall in U.S. home prices that markets are expecting. Whitney said Bank of America will be focused on managing its balance sheet, rather than growing it, following the Merrill deal. Other banks are in similar capital-management situations, Whitney added in a note to clients. With overall liquidity continuing to dry up, fewer mortgages will be available and home-ownership will head materially lower, Whitney argued. That means the peak-to-trough drop in house prices will be "far worse" than the 33% the futures market is currently pricing in, she added.
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