It’s Not Pretty. Picture Review of The National Real Estate Market.
November 26th, 2008 Categories: Real Estate News
The real estate market has changed significantly over the last quarter and dramatically since the 4th quarter of 2007.
And with it, the National (and a number of regional) economy appears to be in the toilet.
Summarized on the United States real estate maps below is the reported 3rd quarter, 2008 reported National real estate market results issued by Federal Housing Finance Agency (FHFA). For comparison I have included the real estate landscape of the 2nd quarter, 2008, the 1st quarter, 2008 with the last quarter, 2007 noted.
The southern States (Texas, Oklahoma, Mississippi, Louisiana and Alabama) continue to hold their own and continue to be good investment areas although they have weakened over the last quarter.
Another investment area to consider is Tennessee.
Montana, Wyoming, North and South Dakota are areas that one should view as investment areas. Especially North and South Dakota. But for me those States area TOO COLD. (Remember one of my conditions for real estate investment is to invest in areas that you may have to live in. Needless to say I prefer not having to live in the Dakota’s).
I have been reading various articles that perhaps Florida would be a good place but most guru’s suggest that 2010 is probably the year to start investing in this State. I have not been a fan of Florida so you are on your own regarding that State.
Washington and Utah (as expected), Colorado, Pennsylvania and New Mexico real estate have weakened somewhat decisively since the last quarterly report. Both Washington and Utah are expensive areas that make real estate investing a challenge. To break even or have a positive cash flow will mean a 30-50% down payment.
Arizona has reverted back to weakness. At the 2nd quarter, 2008 it appeared that it my have started back on the upswing but that was a false break out.
California, Nevada, Arizona and Florida negativity has doubled from the 1st quarter, 2008 to the 3rd quarter, 2008.
California in the 1st quarter, 2008 showed a negative growth of -10.6%. Now in the third quarter it is showing a -20.8 %. Nevada was a -20.9% up from -10.3%; Arizona earlier in the year was -5.1% and the 3rd quarter is accelerated to -13.5%. Finally Florida was -8.2% in the first quarter of 2008 and increased to -16% in the 3rd quarter of 2008.
Within California, the worse of the worse continues to be Merced; Stockton; Modesto; Salinas; Vallejo; Riverside; Bakersfield; Yuba City and Fresno.
Which prompts me to suggest that one should add California to their watch list. But getting investments at an extremely low price (about $ 125,000) will be difficult in California (if one wants to have a positive cash flow, with minimal down). Candidate areas for investment are the worse of the worse areas mentioned above.
It appears that high end homes (approximately $ 1 Million or more) have decreased approximately 20% during this down cycle, while homes valued at approximately $ 400,000 or less have decreased about 45%. This is quite a variance and I suspect that homes valued at less than $ 400,000 will accelerate upward faster within the next few months.
Help is coming. Mentioned in this blog on a number of occassions (the latest being get-in-line) is the disconnect between the Federal Reserve and banks regarding mortgage interest rates. But this disconnect appears to be have been spliced together and it now appears that mortgage rates will start falling to (are you ready) 5-5 1/4% rates (or less) shortly.
Side bar: The real estate market is one of the elements that will drive this economy. Upgrading the United States infra-structures for bridges, roads, water is the second leg that will help the economy upward. Manufacturing (autos being one) is the third element necessary to get the economy going upward.
A redirection of corn for ethenol should be reviewed. Sugar cane appears to be a better option to use for fuel use. Brazil is going wild developing this oil alternative. Sugar cane is not produced significantly in this country BUT we are smart and can grow anything. It becomes “is the price right”.
Side bar: (Be quite). Ventura County real estate has certainly decreased but not at the rate of most areas. In fact it has performed remarkedly well and it is expected to do extremely well over the next 4-5 years.
The damper to Ventura County real estate will be unemployment. Unemployment in the County is currently about 7+%. 5.5 % or less should be the target to have an extremely good real estate market.
Back to the subject. Pictured below is the 3rd quarter, 2008 picture of the National real estate market.
This is what the real estate market looked like at the end of the 2nd quarter, 2008.
This is the 1st quarter, 2008 real estate picture.
This was the appearance of the National real estate market at the 4th quarter of 2007.
Your comments please.
