Housing trends remain weak, but investors see buying opportunities. What's the latest trend?
Housing trends remain weak but show a slight glimmer of hope, according to a series of reports released this week that show the market remains constrained by tight credit and low consumer confidence.
The uncertain market may have sidelined the average home buyer, but many wealthy Americans see buying opportunities as prices continue to bump along the bottom.
Real estate investment traditionally plays a prominent role in building wealth and represents 10 percent of total assets held by Americans with $25 million or more. Current weak housing trends are strengthening these wealthy investors’ interest in property.
Mega-millionaires are more likely to buy property this year than they were during recession, according to a December survey that showed that one-third of the $25-million plus investors were likely to buy commercial real estate in 2011, compared to 22 percent in 2008. Thirty percent said they were likely to seek opportunities in residential real estate in 2011, compared to 22 percent three years ago.
Meanwhile housing trends are giving weak, but mixed signals. Pending home sales, a measure of housing contracts that are signed but not completed, declined in September, but are higher than a year ago, according to data released today by the National Association of Realtors. The groups Pending Home Sale Index fell 4.6 percent to 84.5 in the month of September, but the index stands 6.4 percent higher than September 2010.
The association’s chief economist, Lawrence Yun, says contradictory monetary policy is largely to blame for the prolonged housing slump. “Just leaving excessive cash to sit in banks and not work into the economy is a drag on the overall recovery,” said Yun. “We need a comprehensive approach to address housing issues – not additional impediments.”
New home sales for September hinted at positive housing trends, according to a report released yesterday by the U.S. Census Bureau. Sales of new single-family homes rose 5.7 percent to 313,000 in September, up from 296,000 in August, but are down 0.9 percent from September 2010.
Housing prices as measured by the Federal Housing Finance Agency are near February 2004 levels. Home prices fell a slight 0.1 percent from July to August, according to the FHFA Home Price Index released on Tuesday. For the 12-month period ending in August, U.S. prices fell 4.0 percent with the Pacific, Mountain and South Atlantic regions showing the largest declines. The index shows a 19.1 percent drop from its April 2007 peak.
The Case-Shiller Home Price Indices, compiled by Fiserv Inc., is tracking slightly stronger housing trends in the nation’s major metropolitan markets. The indices measured a slight increase of 0.2 percent from July to August in the 20 largest metropolitan areas, according to data released on Tuesday. Prices across the 20 cities have fallen 3.8 percent since August 2010, though the Detroit and Washington, D.C., markets showed improvements of 2.7 percent and 0.3 percent, respectively. David M. Blitzer, chairman of the indices, sees a “modest glimmer of hope” in the data that shows the 20-city market is 3.9 percent above lows reached in March 2011.