New Housing Trend is Forming- The Third Time is a Charm

The National Association of Realtors announced rising home sales two months in a row; this could indicate the beginning of a new real estate trend.

(realbench.net) -- The National Association of Realtors announced that existing home sales rose for the second consecutive month in May by 2.4%. Although not yet of proportional significance, special attention should be paid to June�s report, which if resembles the previous two-month reports could signal the beginning of an upward trend formation in the real estate market. Such June episode if realized can prove key to breaking the downward real estate spiral that had developed over the last two years.

Investors now have tangible data to weigh against previous trends. If history is a guide, should higher sales persist beyond the current episodes, the real estate markets could be experiencing certain levels of normalization. This does not signify that a quick rebound of the market will occur, but it does present an attractive investment opportunity for investors interested in mid-term to long-term real estate investments. On the other hand real estate investors interested in investment models such as flipping should probably still stay away from this market.

The economy and financial world is changing in ways that we still do not fully comprehend. Banks and other lending institutions are re-assessing their risk taking strategies; surely favorable lending practices would help to alleviate the impending financing strains, but unless loan approval growth far outstrips the rate of housing inventory contraction, it is unlikely to represent entirely the financing solution for real estate investors in the short term. Hence investors should be prepared to bring 20 to 30 percent of the property purchase price to the closing table for down payment. The days of zero down payments are over. Even if interest rates reach higher levels, the existing concentration risks in lending institutions balance sheets will induce banks to delimit the size of the financeable property purchase amount.

The new real estate investor is now more sophisticated, equipped with real estate investment software, and two years of hard real life real estate investment learning; Our actions are now better informed about the pitfalls associated with speculation; Also our appreciation of the importance of risk pricing has also shaped our increasing understanding of real estate indicators and their rationale. Real estate investment indicators such as Growth-Rate-Multiplier, Capitalization-Rate, Loan-To-Value-Ratio, Debt-Coverage-Ratio among others can no longer be ignored.