When it comes to purchasing real estate — either as a primary residence or as an investment — perception is everything. When reports of telltale economic indicators are released, if Wall Street perceives them as bad, the market takes an immediate tumble. But when the indicators reported come is as expected, the reaction is generally good and we see an uptick in market activity. So it is with real estate.
Four real estate industry related reports have already been released this week, and Wall Street has reacted.
1) The National Association of Realtors announced Monday that existing home sales nationwide were up for the month of February compared to January.
2) On Tuesday, the Standard & Poor’s/Case-Shiller home price index reported the worst decline in home prices since the company started tracking data back in 1987.
3) The Conference Board’s Consumer Confidence Index also came out Tuesday with its analysis showing that consumer confidence in the nation’s economy slid nearly 12 percent in March following a sharp decline in February, and remaining at a five-year low.
4) The U.S. Commerce Department reported that new home sales in February were down 1.8 percent from the month before and 29.8 percent from February 2007, although the median home price of a new home increased 8.2 percent from the previous month, to $244,100.
What does all this mean to anyone looking to the nation’s foreclosure market for a home purchase?
It means that there has never been a better time in recent history to get off the fence and buy that primary residence or investment property you’ve been waiting for. A Wall Street Journal article today reports that many buyers are already doing that in Cape Coral-Fort Myers, Fla., the city with the nation’s highest foreclosure rate in February, according to RealtyTrac. And the foreclosure market is a good resource to tap for the best potential discount available in making that purchase.
Wall Street was happy to hear that existing home sales were up nearly 3 percent between January and February. NAR’s chief economist Lawrence Yun called this encouraging and “another sign the market is stabilizing.” Still, on a yearly basis existing home sales were down almost 24 percent from February 2007, and the national median sales price for all housing types for the month was down 8.2 percent from a year earlier.
The question needs to be asked, though, why did home sales go up suddenly in February after months of wallowing in despair? Could it be because home prices are so far down now that buyers are starting to come out their caves and buy?
As the Associated Press reported Tuesday morning, this latest report by the Case-Shiller index, which tracks prices of single-family homes in 10 metropolitan areas around the country, suggests that prices have either been “growing more slowing or declining for 19 consecutive months.” The company’s 20-city composite index also declined in January from a year earlier, down almost 11 percent. This is the first time that both indexes have dropped by double-digits concurrently, the AP reported.
Las Vegas and Miami had the greatest price drops (both down 19.3 percent), while Phoenix, San Diego, Los Angeles, Detroit, Tampa, San Francisco, Washington, D.C. and Minneapolis all suffered double-digit price declines as well. Many of these are markets that RealtyTrac is reporting as major sources of foreclosure activity for investors and first-time buyers looking for bargains in their real estate purchases.
To add insult to injury The Conference Board released the news that its monthly Consumer Confidence Index revealed a lack of consumer confidence about the nation’s present situation and future prospects for economic recovery. According to the press release, based on the 5,000 U.S. households surveyed, consumer perception about the nation’s economy is generally pessimistic about everything from current business conditions to short-term expectations for the future, the outlook for the labor market and chances to see their incomes increasing in the near future.
All in all, this pessimism is also being reflected in the number of distressed homeowners giving up their homes to foreclosure (or simply walking away from their homes) in order to put the past behind them and start anew.
These latest reports suggest that foreclosures will remain at the forefront of the real estate marketplace in many parts of the country for some time to come. Perception is everything in this market, and for savvy home buyers and investors who spend the time needed to conduct proper research, this is evidence that there is a window of opportunity out there right now to purchase real estate at significant discounts if you move to make appearances become reality.