More Facts About Housing

Housing activity is a function of several factors: Rates, the overall economy, supply, population growth, rental prices, sentiment, speculation, liquidity (easy financing terms, loans, mortgages) Over the past 5 years, rates dropped, supply expanded, population expanded, prices rose. That’s normal. But then rates plummeted even further, prices rose more quickly. That is where we saw crazy boom. Now that we are seeing inflation problems, the Feds have raised rates and that is why we are seeing drop in prices.

Lets have a look at few interesting facts about housing/real estate.

  • California is hit the hardest in falling home values in the nation. San Diego will drop more than 13% on average in 2007, Los Angeles more than 11% and Miami will have a 13.6% drop.
  • However on the good side, Washington state and Utah are experiencing massive areas of growth. Texas is undergoing the largest growth in its history since alot of people are moving in from New Orleans due to Hurricane Katrina.
  • In California, the standing unsold housing inventory is moving down rapidly, also a considerable drop in excess inventory in condominium conversions, with owners either selling out or reverting back to rental status. Town house and other low-density home building will continue normally, but there will be a cutback on high-rise development in urban cores.
  • San Antonio was a market experiencing modest growth until recent times. It is predicted that it will appreciate 8.3%. Out-of-town investors flooded in, glutting the market with rental homes.
  • In Colorado the record number of foreclosures has given it a bad rap. Home sales in Pitkin County, home of Aspen and Snowmass, were up 19% in 2006.
  • Alot of borrowers are refinancing ARMs in the past six to eight weeks. One reason people are switching is that the difference in the rate on adjustable and fixed mortgages has narrowed. The rate on a mortgage that can adjust annually was 5.84% recently, compared with about 6.22% on a fixed-rate mortgage. Borrowers are opting to pay a little more for the fixed-rate mortgage to avoid the risk of a reset on an adjustable mortgage in the future.
  • When the housing market goes bust, the rental market should expect a boom. But this is not the case right now. Developers overbuilt rental properties in recent years, leading to the highest vacancy rates in more than 15 years and forcing landlords to offer incentives. A big drop in the housing market could actually make matters worse. When home prices fall, foreclosures often increase rapidly, and many are converted into rental units until a buyer can be found. That only adds more rental supply to the market, creating oversupply problems.
  • Decline in private residential projects caused a gain in private non-residential construction, reflecting increases in spending on transportation projects, hotels and commercial space, helped offset the decline in residential building.
With all these bad news i recommend staying away from housing stocks. If you really love real-estate learn more about REIT. I will post more about REIT soon. This could also mean a good time to jump into buying a house as an investment in growing cities which is expected to see boom in the near future.

Recommendation: These are few of the stocks I follow and recommend to keep away from it or think about shorting them. HSOA, RSTO, BLDR, BECN, FUR, TOL

  • missed out on LEND and NFI!

    i shorted WCI and the stock promptly jumped 30%. OUCH!