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Real Estate Investment News & Blog

Positive Housing News of 2016

We’ve seen plenty of negative economic data, statistics, and other financial stories: Troubling unemployment numbers, government debt, a weakening dollar’s purchasing power, rising inflation, and asset valuation trends.

There’s also been some very positive news as we approach the middle of 2016.

Since 2007, the housing and financial markets have moved from one extreme to another with wide-ranging price and demand swings one would more likely see on a roller coaster ride at an amusement park.
housing bubble
While there are valid reasons to be cautious as an investor or seller today, just as one should be during any “boom,” “bust,” or stagnant economic cycle, people should also question whether or not their data or news sources are “too negative” or “too positive” before taking action.

Buyers, sellers, tenants, landlords, and agents may consider asking “How do you feel about this offer?” as opposed to “What do you think about this offer?” since most of us feel rather than truly think or analyze.

Bad News Sells…

For Americans and with most media, “bad news” tends to capture readers’ or viewers’ attention more quickly than “good news.” As a result, the vast majority of mainstream media and Internet media outlets focus on negative news stories rather than the positive, encouraging, and inspiring stories.

Media reports over the past few decades have suggested that “bad news” may be reported as much as seven times more often than “good news” (That’s a 7 to 1 “bad news/good news” ratio), especially on television.

A Gallup study released on July 8, 2013 noted that television was the #1 most popular media option for Americans for their news and current events as confirmed by 55% of Gallup respondents. The number #2 option for news information was the Internet at 21%.

Studies have shown that people care about the real or perceived threat of bad things much more than they do about the possibility of good things happening to them.

People’s negative brain tripwires are much more sensitive than their positive triggers. People are more likely to jump to their feet prior to making a decision or taking action after being made fearful rather than inspired, sadly.

Too many people are fearful rather than happy in life. Fear, in turn, causes the release of stress hormones, which make most people reactive rather than proactive.

When we react, we are not thinking as clearly as opposed to being proactive based on weeks, months, or years of research and planning. Fearful people are much easier to control and influence, which is partly what the advertisers or sellers want when they sell us their consumer goods, services, or assets–like stocks or real estate.

Now for Some Good News…

Pending Home Sales reached a 10-year high in April 2016, per the National Association of Realtors. The Pending Home Sales Index trend, based upon the most recent home purchase contract signings, reached 116.3 in April 2016.
Good news for real estate investors
This was the highest reported number since February 2006. The Pending Home Sales Index had increased positively for 20 consecutive months when compared with the previous year-over-year numbers.

Few housing data trends are more factual or relevant to the positive or negative housing trends than the Pending Home Sales Index’s reporting of actual signed home purchase contracts and deals in escrow.

The main website for the National Association of Realtors describes and defines the Pending Home Sales Index as follows:

“The Pending Home Sales Index (PHS), a leading indicator of housing activity, measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos and co-ops. Because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads Existing Home Sales by a month or two.” (*Source: http://www.realtor.org/topics/pending-home-sales)

Here is the breakdown of the Pending Home Sales (PHS) by national regions:

Northeast: The PHS increased to 98.2 in April 2016. This increase in signed home purchase contracts was 10.1% higher than April 2015.

South: The PHS Index ticked upward by 6.8% to reach 133.9 in April 2016. These numbers were 5.1% higher than a year prior.

Midwest: This region posted the only drop in the number of purchase contracts with a very slight – 0.6% (less than one percent) decline to 112.9 in April 2016. Yet, the PHS numbers for April 2016 were 2.0% higher than the April 2015 numbers.

West: The PHS numbers jumped 11.4% in April 2016 to 106.2. These purchase numbers were 2.8% higher than the April 2015 sales numbers.

The number of homes for sale (aka “home inventory numbers”), which may or may not be artificially suppressed due to keeping shadow inventory properties offline, is still relatively low in most regions.

This lack of available inventory in a many popular regions across the U.S. is one of the key factors pushing home sales and prices skyward.

Another key factor is that rates for 30-year fixed mortgage loans have remained below 4% for 16 of the previous 17 months, according to the National Association of Realtors’ Chief Economist Lawrence Yun.

Most people need third-party bank or private money loans to purchase a property, so the record, or near record, low mortgage rates help to increase buyers’ demands and sellers’ prices at the exact same time.

That said, it’s wise to thoroughly review, investigate, and analyze both positive and negative information sources before you make an informed decision that’s based more on your proactive thinking skills, rather than your reactive emotional patterns.

What are your thoughts?

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About the Author...

Check out Rick’s new book The Credit Crisis: 10 Years and Counting (August 2017 publishing date) as well as The Credit Crisis Deals: Finding America’s Best Real Estate Bargains.

Rick Tobin has a diversified background in both the Real Estate and Securities fields for the past 25+ years. He has held seven (7) different Real Estate and Securities brokerage licenses to date. He also writes college textbooks and real estate courses in several states for some of the largest educational firms nationwide.

Rick has an extensive background in the financing of residential and commercial properties around the U.S with debt, equity, and mezzanine money. His funding sources have included banks, life insurance companies, REITs (Real Estate Investment Trusts), Equity Funds, and foreign money sources.

You can visit Rick Tobin at RealLoans.com.

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