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The Stock Market Looks At Real Estate Well, we all have heard the bad news, housing sales down again, hugely - 23% in the quarter.  NAR
reports that sales are at their lowest since the sales series
launched in 1999, and single family sales are at the lowest level since
May of 1995. And it doesnt look much better in the near term either.
Pending sales, a forward indicator of market activity, dropped 30%
based on contracts signed on May and is almost 16% the May 09 numbers.These reports are always about today. The stock market, however, is considered a discount mechanism. It trys to look into the future...to look past a problem and try to determine value and opportunity. So I wanted to see what the stock market had to say about these dismal numbers.
Heres What the Stock Market Says About Real Estate
Its all About What You Focus On Its not without its losers, but the sector rallied on this news! In fact demand for homes sold has been relatively strong given real market conditions. see chart Even in the face of foreclosures, underwater borrowers and unemployment and the future of Fannie Mae and Freddie Mac. Why? Affordability Stock market investors are looking at whats next and they see affordability. Home prices have declined to levels beginning to look affordable. Certainly painful for millions, but its how markets cycle. If prices got silly, then they have to rationalize before an intelligent buyer will enter. Supply The builders have not been putting up much new stock for quite a while and today I noticed the builder stocks were up. Lennar did a deal worth 3 billion with the FDIC to buy bank loans and Toll Brothers swings to profit today. All of this in spite of a huge inventory overhang, perhaps the largest on record. see chart Cheap Money The cost of many is also very low and part of the affordability issue. Average rates on 30-year fixed-rate mortgages are hovering around 5%. Demographics Investors are hoping demographics and population growth can also take up the slack. Why the S&P Real Estate REIT index is up from a one year low of $73.85 to over $105 today. We have more to work through and the near and mid term are rocky but the economy is still expected to recover and homes still sell. REsourced from www.yourpropertypath.com You may republish this article, as long as you do not edit and you agree to preserve all links to the author and www.yourpropertypath.com
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