WITH the continuing gloom in the US housing market, you can find small pockets of home-price stability -- communities that are actually recovering from the housing bust.
This is where you need to be educated, in order not to make the same mistake twice. It’s never about personal preference, but always about LOCATION.
According to Zillow, home values in a handful of communities are where they were, just before the most frenzied days of the real-estate bubble. Focusing on communities with sufficient sales activity to produce statistically valid value estimates, Zillow spotted 25 places that are within single-digit percentage points of their home-value peaks. (Zillow found no communities where values have surpassed their high-water marks.) Not bad considering that home values in some major metropolitan areas are at half their bubble-era peaks.
As a result, spotting the factors that have helped those communities get by may allow all homeowners to better gauge what’s going on where they live and what the future may hold for their home’s value.
Some words of caution
First: Don’t look at these as housing-market “winners,” and don’t go looking for new places where you can score a killing. That’s the thinking that got much of the country in trouble in the first place. Housing isn’t an investment like stocks or bonds and shouldn’t be approached that way.
Second: Although many of the areas have certain traits in common, most are just nice places to live, places where anyone might want to work and raise a family. Each is special in its own right.
Finally, the biggest reason that most are surviving the downturn is because they never experienced the huge price run ups that Florida, Nevada or California did in the first place.
This all should be common sense but maybe easier said than followed. I also want you to not settle and maybe save up more to able to buy in a better area.
So what should you look for if you are thinking of selling your home or buying a new one? What does a healthy real-estate market look like today?
Here are three big factors to look for. If your community shares any of these traits, you may already be on the rebound.
Employment
It’s the oldest joke in real estate, but with a new punchline:
Q: What are the three most important things to consider when buying a house?
A: Jobs. Jobs. Jobs.
Clearly, the No. 1 factor in determining whether a community has passed through the worst of the housing debacle is its current state of employment. There has always been a connection between the local jobs picture and the local real-estate market, but it’s even greater today.
For example, a lot of our nurses bought close to their hospitals or work places, but they also bought from far away places where a lot of them lost money.
Rents
Local rents are very strong indicators of real-estate values. Home prices in most communities that have best weathered the downturn tend toward the low-rent end. That is, they have lower price-to-rent multiples, and house hunters will often find it cheaper to buy properties than to rent them.
Look at a typical “rent vs. buy” calculator available on many real-estate or personal-finance websites. Most calculators figure that if prices are more than 15 times annual rents, then a market favors renters; under 15 times, buyers.
Beware the outliers. Extremely low price-to-rent multiples can be warning flags for seriously depressed markets that are glutted with unsold properties. Trulia, another real-estate information site, regularly publishes a rent-to-buy analysis of large metropolitan areas, and the most “affordable” markets are a Where’s Where of the real-estate bust: Las Vegas (prices 6 times rents), Phoenix (7), Miami (8). At the opposite end, Trulia’s survey says the “least affordable” market is New York City (39), where home values are down just 9.1% from their peak.
Foreclosures
Healthier communities have fewer foreclosed properties pulling down values of other homes.
Just as jobs fuel the local housing engine, foreclosures put on the brakes. Even in good times, one foreclosed property in a neighborhood can bring down the values of every other house around it. And, in bad times, entire metropolitan areas can be swamped by abandoned, foreclosed houses.
In 2010, the worst year so far, about 2.23% of all the homes received a foreclosure filing, according to RealtyTrac, an Irvine, Calif., firm that monitors foreclosed properties. In Las Vegas, the poster child of the Sun Belt’s real-estate bust, the foreclosure rate was 12%, more than 80% of homes are worth less than their mortgages and values are down more than 50% from their peak.
Please be aware of how much more foreclosure or short sales are in the areas of interest, maybe its not time to pull the trigger yet.
I suspect the market to get much better next year by force due to it being an election year.
Good luck and be informed and be smart about your next investments.
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Please call Ken Go of 1st Innovative Finance Group at 562-697-7028 or write to This e-mail address is being protected from spambots. You need JavaScript enabled to view it for your inquiries.
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