Profiting From Real Estate Investments An Investor Newsletter From HomeVestors Of America, Inc. By Marcie Geffner / Vol. 3 No. 6 06/30/2008 Are We At The Bottom Yet? Declining real estate markets can offer excellent opportunities for investors who want to pick up properties at a comparative discount. But bargain investments still come with an unavoidable risk that fallen prices may fall further. How can investors figure out whether to buy now or wait on the chance that sellers may be forced to accept even lower prices in the future? The answer depends on research and a thorough understanding of local economic and housing market conditions. Useful information isn't difficult to obtain, though a certain amount of legwork and studious reading may be required. Newspapers, online news services and industry Web sites publish a wealth of data that can be used to analyze local-market trends. Five of the many indicators that merit attention are: Inventories of for-sale homes. A large inventory of unsold homes suggests a weak housing market characterized by excess supply and slow sales. Inventory usually is described as a number of months' supply at the current pace of sales. An inventory of, say, 12 months means it would take one year for all the homes currently on the market to be sold. A market that soft may result in lower prices. Days on the market. In a fast-paced market, attractive homes in desirable locations can sell quite quickly, and that demand tends to bring on rising prices. But homes that languish on the market for weeks or even months tend to put downward pressure on prices. Pending sales. An up-tick in pending sales, which refers to homes that are under contract, but not yet closed, can suggest that the pace of sales has quickened. If sustained, an increase in pending sales could suggest a strengthening market that might trigger higher prices. Builders' concessions. Builders tend to offer price discounts, interest rate buy-downs and upgrades as inducements to buyers in weak markets. The disappearance of such concessions suggests builders have sold off their standing inventory of already-built homes. That reduces the supply of for-sale homes and can contribute to price stabilization. Apartment rents. Rising rents suggest strong local demand for housing and potentially higher prices for rental properties. But if home prices and interest rates decline while rents increase, more renters may opt to buy a home instead of rent. This dynamic is complicated. Housing markets are also naturally subject to fluctuations, cyclicality and unpredictable anomalies. That's why experienced investors track the trends, add a smidgeon of gut instinct and buy when they spot a good opportunity. The mythical "bottom of the market" is oftentimes elusive and seen only in the rearview mirror. Copyright 2008, HomeVestors of America, Inc. All rights reserved. No part of this article may be used or reproduced in any manner whatsoever without written permission of the author. COMING NEXT ISSUE: The best places to look for finding money for real estate. The Investor e-Newsletter is provided free by HomeVestors of America, Inc. Listen to the HomeVestors Real Estate Investors Hour each Sunday at 8 a.m. on WBAP Radio, click here to listen. HomeVestors of America HomeVestors®, the "We Buy Ugly Houses®" company, is now in 35 states and has more than 270 franchise offices. Learn more about owning a HomeVestors franchise by registering for our Webinar, held each Tuesday at 4 pm CST. Register at www.homevestors.com, then click on the Buy A Franchise icon, then click on the Webinar/Seminar tab. If you have a question, comment, or an idea for our newsletter, please click here. <back | printable version