In the very same day, the following two real estate market announcements were made:
** Mortgage applications increased for a third consecutive week
** The sentiment (outlook) of home builders hit its lowest level ever last month
The increase in mortgage applications is undeniably a positive sign, as it indicates the rising confidence of the home buying public that the prices available to them now are too good to pass up. But the historically poor sentiment of home builders appears to say the opposite: That the real estate market is and will remain weak.
It’s the confluence of these two issues that has my attention.
On the one hand, rising mortgage applications is undeniably a good sign. This means that people are actually out in the market making offers on properties and seeking mortgages for financing. Any way you slice it, that’s a positive indicator for the immediate future of the real estate market.
On the other hand, there’s the incredibly low level of sentiment for home builders. I think that’s easily explained by realizing that home builders have to judge the viability of their business based on whether their homes will sell in a reasonable amount of time. And right now, there are so many foreclosures on the market that other homes – and particularly full-price new homes – will have no hope in the competitive scheme of things.
Furthermore, home builders as a group tend to see the economy through a rear view mirror. This means that right now, builders are basing their future building decisions on what’s happened during the past 1-3 years. And clearly, it hasn’t been pretty.
As I said, it’s the confluence of these two indicators that interests me. With a leading indicator (mortgage applications) giving a positive sign and a lagging indicator (home builder sentiment) giving a negative sign, what does it mean?
I believe it means that a bottom in the real estate market is at hand.
Your thoughts, comments and criticisms are welcomed. As always, thank you for visiting FreeRealEstateTraining.com.
UPDATE: The above information was based on news from yesterday (July 16). Here’s some updates for today, July 17:
- Housing starts in June jumped quite unexpectedly by 9.1%
- Building permits increased 11.6% in June
- New construction on single family homes fell
It’s a busy day for me today and I’ll do my best to update you with analysis of this information. But it appears quite positive to me thus far.
Again, thanks for reading FreeRealEstateTraining.com!