Real Estate: Discovering The Gems In An Uneven Road To Recovery

By on December 8, 2012

The latest round of national housing statistics in the U.S. paints a picture of the beginning of a real turn around and the majority of experts proclaim a recovery is here. So why is it that when some home buyers and investors look around at their local real estate markets they still see a glut of distressed properties and many homes which have been sitting on the market for a while?

Making Sense of the Housing Recovery

There is still much confusion about the state of the U.S. real estate recovery, and it’s completely understandable why some potential buyers are having a hard time making sense of it. Much of the disparity comes from different indexes which use different metrics for tracking home values and sales prices. Plus, of course national statistics even out the digits of those markets still in the pit of the crisis and those which have already been enjoying a rebound for some time.

National 3rd Quarter 2012 Statistics Show:

  • Home prices have risen 3.6% over the 3rd quarter 2011 per the Case-Shiller index;
  • The largest jump in year-over-year home prices in 6 years as of October per CoreLogic;
  • As of October existing home sales were 10.9% higher than 2011 according to NAR;
  • The National Association of Realtors reports distressed sales down to 24% of real estate transactions.

Still, it’s no secret that there is a huge amount of shadow inventory of foreclosure properties and delinquent loans working their way through the system. This is destined to keep some markets soft for some time. Some even project this could be over a decade in hard hit markets, keeping home value depressed.

Searching for Buying Signals in a Fragmented Market

So which markets should real estate investors and home buyers be confident in buying in and which should be avoided like the plague? Obviously while low home prices and low interest rates may make even the most horrific markets seem appealing in terms of cheap properties compared to a few years ago no one wants to buy a depreciating asset. Clearly there are parts of Detroit and Nevada and even New York which may take many decades to come back, if they ever return from becoming urban wastelands.

So what should buyers be looking for and what indicates a market is on the mend? There are markets which are posting lower foreclosure numbers, double digit rises in home prices and low inventory levels. A few have even clearly been out of a crisis for 12 or even 18 months. Of course, there is nothing wrong with looking for value in markets which are still turning around providing the prospects of a booming job market are good, the local economy is strong and the demand is there.

Discovering Bright Spots for Buying Homes with Confidence

Even for the real pessimists there are some incredible gems, cities which have, and will continue to defy the local and national economy, to outperform. Just as London’s real estate market runs completely separated from the rest of the UK due to the international buyers it attracts and its status as a separate asset class, we have several here in the U.S., too. San Francisco is certainly one of them, even without Facebook. In San Diego it is a similar story.

On the East Coast we also have niche markets like South Beach in Miami and Key West, which continue to buck (or lead) national trends attracting affluent buyers from all over the globe. Just look at the stats in Key West, FL. In October there were just 15 foreclosure filings according to RealtyTrac. According to data from the local Realtor’s association home prices there have climbed 35% in 3 years, and sales of 2 to 4 unit properties are up 100% since last year and up over 62% in value.

Real estate investors and savvy home buyers are watching their target markets closely, tracking local trends – including sales and inventory statistics – and comparing them with both local trends over the past few years and current industry factors. In a climate of uneven recovery, investors are going over statistics with a fine toothed comb. But in every market, low interest rates and values that remain well below market values in 2008 make real estate an attractive investment opportunity.

M.-J. Taylor writes on real estate for clients such as Key West Realtor Rudy Molinet, the top performing broker in the Southernmost City. You can find more of M.-J.’s articles through Google+.

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