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?
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. When prices get silly, they have to rationalize before an intelligent buyer will enter.
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
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%.
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.
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