A report published Tuesday showed that home values fell nearly 3 percent in January 2009 versus the month prior and by 19 percent from last year. On the surface, data from the study looks like more bad news for housing. With deeper inspection, though, we uncover reasons to discount the report's finding. For one, the report includes home price data from just 20 cities around the country -- and they're not the 20 most populated cities, either. For example, data from #4-ranked Houston is not included and neither is #7 San Antonio nor #10 San Jose. #54 Tampa, however, is included. Secondly, the report is two months lagging. Published March 31, its data is only accurate as of January and a lot has happened in the last 2 months. This includes a record-drop in interest rates and the introduction of an $8,000 tax credit for qualified first-time home buyers. The stimulus has helped raise home sales volume on both new homes and previously-owned ones. And lastly, one more reason to question the relevance of the Case-Shiller report is that a government study on the same topic showed home values rising over the same period, not falling. According to the Federal Housing Finance Agency, home values grew 1.7 percent from December 2008 to January 2009. In the end, home values are a local phenomenon that can't be summarized as a national "summary". National data can be helpful for watching longer-term trends, but it shouldn't be used to make a "Buy or Not Buy" decision. For that, talk with a real estate professional with access to local data instead. Source List of United States cities by population http://en.wikipedia.org/wiki/List_of_United_States_cities_by_population (Image source: LA Times)

As you might know, the term “inflation” refers to an across-the-board increase of prices paid for most goods and services.

Inflation has been on the rise in large part due to the weakening of the U.S. dollar and the drastic run-up in the price of oil. When inflation rises, one of the things that the government usually does to combat inflation is to raise interest rates. Among other things, interest rate increases tends to increase the value of the U.S. dollar which frequently tends to push consumer prices back downward, thus fighting inflation.

I am not sure that the government will begin to aggressively raise interest rates to fight inflation simply because the U.S. dollar has been rising and oil prices have been declining very aggressively in recent weeks.

However, if interest rates are increased, it’s probable that mortgage rates will follow. Based on that, my suggestion to you is to consider acquiring investment real estate right away! Here’s why:

• While home sales are down nationally, many of the worst-hit markets are actually already improving quite dramatically
• Real estate prices are very low right now - without a doubt, real estate is on sale right now
• If you can acquire a mortgage to finance your properties now before mortgage rates go quite a bit higher, you’ll be able to charge higher rents in the near future because rental prices have a correlation to interest rates

This information is not really a prediction, though I think it’s possible things will play out this way. The real objective of this post is to give you an idea of how some economic factors (such as inflation, currency values, etc) have a very real effect on you as a real estate investor.

Have a great day, my friend! Please be sure to check out more information here on FreeRealEstateTraining.com!

30-year mortgage rates hit their highest level in a year last week, pushing mortgage applications (both purchase money and refi’s) downward, breaking a 3-week uptrend for mortgage applications.

Let’s be clear: This is a negative occurrence, as fewer mortgage applications invariably means fewer mortgages granted and fewer properties sold. However, its merely a “blip” on the radar screen since a single week of activity does not indicate a pattern.

The important thing to watch is the trend. If mortgage applications continue to fall for several weeks or longer, that is a practical indicator that the housing recovery may have stalled somewhat.

In somewhat related news, Wachovia reported a multi-billion dollar loss in a recent fiscal quarter, and of course blamed it primarily on the housing crisis.

And President Bush and Congressional leaders have apparently come to an agreement on how to bail out Fannie Mae, Freddie Mac and millions of troubled home owners. Wonderful. The government runs to the rescue again - and in the process destroys its own fiscal viability. More about this later.

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In the very same day, the following two real estate market announcements were made:

** Mortgage applications increased for a third consecutive week

and

** 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!

For a third straight week, mortgage applications were on the rise according to the Mortgage Bankers Association. Simultaneously, interest rates were dropping and the fall and bail-out of Fannie Mae & Freddie Mac were in full swing.

It’s interesting isn’t it, that mortgage applications are up - indicating more buying activity - while all of the news in the media is about the gloom and doom facing big lenders.

Here’s a simple economics lesson: A “leading indicator” is a sign that people look for that historically has signaled a particular event in the future. In other words, events or happenings that are considered “leading indicators” tend to be predictive in nature.

One leading indicator is mortgage applications. As that number grows, the underlying real estate market tends to follow. Why? Simple supply and demand. As more people get in the housing market, housing prices tend to rise. Very simple.

I’ll have more to say about this in coming days. So remember for now that there are a lot of a very positive signs in the real estate market for anyone who is willing to look for them!

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