Home & Real Estate Investor News Nov 2005
 A publication of The Association Of Home Investor Specialists

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In This Issue

How To Spot A Buyer's Market

Home Sales Remain Strong But Some Regions Slowing

Pending Home Sales Slip

Tips on The Home Inspection

How To Spot A Buyer's Market

As homes stay on the market longer, new home builders can feel pressure to reduce prices as they cannot afford to sit on unsold inventory. Eventually this downward pressure on prices could trickle through to the existing home sales market.

With existing home prices still increasing at 15.8% over the year, any downward pressure on prices is more likely to lead to a leveling off of the price gains as opposed to actual price declines. Exceptions to this could be areas that have experienced more significant gains over the past two years. These hot markets may actually see a decline in prices as inventory builds.

How To Spot A Slow Down

Don't wait for the stats to be published to decide if you are in the midst of a market slowdown. (Most stats lag the market by at least three months). Here are some tell tale signs your market is slowing down:

• The number of homes on the market is significantly higher than the same period last year.

• You have more than six months of inventory on the market. (The number of homes for sale divided by how many homes have sold over the past year, multiplied by 12 equals the number of month's supply).

• Properties remain on the market longer than you would expect.

• Sellers are offering price breaks on competitively priced homes.

• New-home prices begin to fall.

Inventory levels are the best sign of a buyer's market since real estate is an almost perfect supply/demand model.

Ask your Home Investor Specialist to give you monthly updates on the inventory supply situation so you can spot a slow down before it impacts prices. If you are selling, this will help you to aggressively price your property before everyone else drops their prices, and if you're buying, you can start looking for bargains from "must-sell" owners who are having trouble selling. (Must-sell owners include people who have already moved out, divorcees, estate sales, people in pre-foreclosure and owners who risk losing their new purchase if they do not sell their existing home).

To read the full story online go to
http://www.ushomeinvestor.com/articles/buyers_market.htm

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September Sales Remained Strong Despite Signs Of Softening Markets

David Lereah, NAR’s chief economist, said near-record activity was supported by spiking home sales in areas surrounding the Hurricane Katrina disaster zone. “We are now getting some hard data from this region, with spot checks showing sharply higher home sales to residents who were displaced by the hurricane. The sales surge is more than offsetting declines in the disaster zone.”

The national median existing-home price² for all housing types was $212,000 in September, rising 13.4% from September 2004 when the median price was $187,000.

The NAR suggested in a news release this month that sales are softening and that the real estate boom will transition into a “soft landing”. Total housing inventory levels inched up 0.3% at the end of September to 2.85 million existing homes for sale, (a 4.7-month supply at the current sales pace).

However, according to the Association Of Home Investor Specialists, these figures mask differences in regional and local markets, where some towns have inventory levels approaching a year of more.

To read the full story online go to
http://www.ushomeinvestor.com/news/nar102505.htm

Source: National Association of Realtors 10/25/05

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Mortgage Rates Rising?

According to Freddie Mac, the national average rate for a 30-year fixed-rate mortgage was 5.77% in September, down from 5.82 percent in August; the rate was 5.75 percent in September 2004. However, rates are predicted to rise with the latest announcement of a hike in the Fed's short term rate this week.

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Nationally Home Sales Hits Record But Some Markets In Decline!

Pending home sales rose to a record level in August 2005, defying some expectations of a cooling market, according to the National Association of Realtors^®. However, a close examination of the figures reveals some regional markets are cooling!

The Pending Home Sales Index¹, based on contracts signed in August, rose 3.2% to a reading of 129.5, and is 4.7% higher than August 2004. The previous record was 128.1 in October 2004.

The index, which is a leading indicator for the housing sector, is derived from pending sales of existing homes. A sale is described as pending when the contract has been signed but the transaction has not been finalized. Pending home sales typically close within one or two months of signing.

To read the full story online go to
http://www.ushomeinvestor.com/news/nar100605.htm

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Buying Real Estate: Property Inspections

Investors will always run into opportunities to purchase where having no inspection contingencies will give them at an advantage. In general, such opportunities should be left to experienced investors who thoroughly understand what to look for when previewing a property with an eye to buying it as an investment.

For the majority of investors, a licensed inspector should undertake a thorough property inspection. Any offer to purchase should include an option to cancel the offer or renegotiate the price if a subsequent property inspection reveals defects that had not been accounted for when making the offer.

The Right Inspector ... Good vs Mediocre

A good inspector can find the problems associated with your potential investment that you miss; a mediocre inspector may only report on things that are obvious.

As well as being licensed, you should check into the background of any inspectors you might be considering. Even if you are using a large inspection company with many inspectors, you can ask for about the experience of their inspectors before determining who to select.

Once you find a good inspector, you'll want to keep the same one for all your properties, so it's worth taking some time upfront to do your homework.

Look for experience in the construction industry prior to their work as an inspector. Some inspectors may have worked as building inspectors for local towns.

You want to find an inspector who is willing to have you walk the property with them and explain their findings to you as they go. This allows you to get a thorough understanding of the property and forces you to examine the property in more detail.

A thorough property inspection can take over two hours [I've even had inspectors take four hours{ed}].

Hidden Problems

Property inspections do have their limitations. In general, inspectors are not required to inspect anything that is covered up or inaccessible. This means that some problems may never be revealed unless the inspector has a good eye for telltale signs of something beneath the surface. Your inspector should point out the potential existence of a defect and recommend further, more explorative inspections inspections be undertaken to determine the extent of any hidden damage/defect.

For example, damp penetration into structural timber may result in mold, dry rot, wet rot or insect infestation, any of which may be hidden from view. A sharp-eyed inspector will spot the source of damp penetration and point out the potential danger of hidden damage. Most damp problems leave telltale signs.

The full story online at http://ushomeinvestor.com/buyers/inspections.htm

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