By: Dennis Norman
The National Association of REALTORS(R) just released their pending home sales index for November which shows pending sales (houses under contract to be sold but have not closed yet) are down 4% nationwide from October and down over 5% from a year ago. With all the recent bad economic news this is not surprising.
The Northeast region of the United States showed the biggest decrease from a year ago beign down over 14%. The Western region showed the best numbers with a 19% increase from a year ago. I think the large disparity between the regions proves two things: one, as many have said; “real estate is local” and two, as I wrote about in an earlier post lower prices are stimulating sales as is being proven in the Western region of the country. Prices are down but sales are up. I realize lower property values are hurting many people but the positive of it is there is a market still…once prices lower to the point where buyers see value they come out of hiding and buy. Due to the large amount of foreclosurers and other distress sales many of these buyers that are coming out are investors to take advantage of the opportunities they see. This is good since there is no doubt in my mind that smart investors are going to make some buys in the days ahead that a few years from now, after the market and economy have returned to healthy conditions, they will look at the equity they have in the homes and pinch themselves to make sure it isn’t a dream. Beware however, the key words in my prior sentence are “in a few years”, realizing that “few” may be 2 or 7 or 8, who knows how long it will take to restore things to normal? You better be sure you have the staying power and the deal is good enough to let you hang on and wait that long if necessary to reap your reward. Also, beware of one other thing…you are not the only one with this plan!
What? You mean other people are buying homes at “cheap” prices, renting them out until conditions improve with the plan of selling them for big profits then? Yep. A very diverse group as well….real estate people, doctors, lawyers, teachers and home-makers for a few. Hey, it’s great to see the entrepunrial spirit that help build this great country we are blessed to live in however there’s a catch. What do you think is going to happen when, after market conditions improve (remembering that one thing necessary for conditions to improve is the inventory of available homes for sale be absorbed down to a reasonable number) suddenly the market is flooded with literally thousands and thousands of homes for sale by investors that are ready to cash in? You guessed it, in a lot of markets this may very well knock the recovery back again. More on this later but I would just suggest you beware and when you do move forward on good opportunities keep in mind that in order to realize the gain you want you may have to hang onto the property for quite a while.
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