A big week ahead
As you look down the road at your investment property finance decisions, this week ahead may prove to be the one where you look back and declare “the housing market has finally, and definitively, reached bottom.” There will be a number of economic indicators coming out this week that will help in ultimately making this call.
While housing has continued to be one of the largest drags on the U.S economy since the bubble burst back in 2008, all property investors have been wondering if the bottom has been reached yet. The constant flow of foreclosures, ever-increasing inventories and average time on the market for properties in general, as well as poor new-build numbers in the past few years, have all slowed the housing arena to a crawl. Of course, this has made for an ever-increasing and robust rental market, as homebuyers stayed on the sidelines in droves.
However, recent rebounds in stock valuations of some of the nation’s largest home builders in the past few months, as well as their forecasts for greater home buying during the remainder of this year, lead to the conclusion that the bottom is near. In addition, apartment construction has been rebounding of late as well, as more buyers look towards renting for the short term, until they see a bottom has been reached.
In some local markets around the country, house inventories have been shrinking. Also, property investors, as we know, have been out in force over the last couple of years, picking up foreclosures and other bargain-basement properties that they can either rent out, or look to re-sell as the market slowly rebounds.
Apartment construction as indicator
In general, apartment construction traditionally precedes new home construction by one to two years. And of course, once the bottom is reached after any housing bubble, prices usually will continue to drop off a little more, even as the bottom is ultimately being hit. This is simply due to the time lag of consumers psychologically assimilating the concept of a bottom being reached, then turning their thoughts into action by actually searching for, then closing on their next home.
Key reports coming out
Some of the key reports and numbers to be watched this week to check on as indicators of a bottom being close at hand include the National Association of Home Builders Market Index, which is due out on Monday. It’s a measure of builder confidence. (It rose in February to 29, up from 25 in January.)
Next, look for housing starts and building permits figures, to be released by the Commerce Department on Tuesday. A number over 700,000 for building permits will represent a very positive sign for the housing rebound. On Wednesday the existing home sales report will come out from the National Association of Realtors. Later in the week new home sales will be reported by the Commerce Department. If sales are at or above 325,000 units on an annualized basis, while very low, it would be another indicator that inventories are going down.
Watch for the trends
So look for the trends in all these reports this week. They may all point to the beginning of the end for the housing downturn. Of course, once the bottom is reached, you’ll want to start thinking about shifting your investment property finance decisions. It may soon be time to start looking at fixing up properties to turn over and sell again, rather than simply holding onto rental units.
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