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Two Perspectives on Recent Real Estate News

I have been hearing and reading mixed news on the real estate market, so in today’s post I will make a point from the Bear’s perspective and the Bull’s perspective regarding the housing market.

Mr. Bear

The recent Pending Home Sales Index increased more than expected, as buyers took advantage of the home buyer tax credit. And yes, those numbers will show up in Existing Home Sales in May and June, but then watch out.

This index is based on contracts signed in April, and that’s how the credit was set up; you had to sign your contract by April 30th and close by June 30th in order to get your tax credit.

And then mortgage applications came to a halt in May, traditionally the height of the spring housing season. Now, that May is over, mortgage purchase applications are down nearly 40 percent from a month ago to their lowest level since April of 1997.

With historically low mortgage rates continuing, the trend from the prior three weeks continued, as refinance applications increased while purchase applications decreased. Purchase applications are now almost 40 percent below their level four weeks ago, while refinance applications are at its highest level since December.

Finally, since short sales take too long, I heard that the NAR is asking Congress to provide flexibility on the deadline for closing.

Mr. Bull

The government, news media and most people are focusing on the top down by looking at the unemployment and other housing indicators.  As we know most of this is not positive news. 

I want to present the case for the bottom up.  The latest few times I tried to go to a restaurant lately, there has been a long wait.  One year ago, we could go on a Friday/Saturday night at 6:30 and get a table.  There are more crowds now at retails stores.  The stock market is a leading indicator looking out 6 – 12 months.  The past year and this includes the recent pull back, the market is up.  There are areas in this country and it is getting more numerous, where the inventory of real estate is low. 

Now can something stop the recovery and push us into a double dip? Yes, but short of a major shock, we should be seeing better numbers.  People traveling for Memorial Day Weekend was way up.  I talked with people that rent down the Jersey shore and they all said it was crowded and all of their properties were rented. 

When reading news we all need to be realistic and open minded. This means looking at all of the facts. Real estate may have seen the worst and we could be in for a few years of low to no appreciation but no declines.  Make no mistake, there will be a next run-up – it could be 5 to 10 years but there will be a next run-up.


June 4, 2010 - Posted by | Uncategorized | ,

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