Value in Today’s Housing Markets
The mortgage crisis began to unfold in 2006, with steadily eroding home prices and negative housing news still in play through 2008, with some predicting no real improvement until late 2009 or 2010. However, the news is never as bad as the media makes it appear. One reason is that the media relies heavily on information from pricing indexes and “experts” who watch them.
There is a great deal of good information and trend indicators in the national home price indexes, such as the Case-Shiller and the OFHEO (Office of Federal Housing Enterprise Oversight) Home Price Indexes. No serious investor would want to ignore the big picture which involves following these indexes … to a point.
A great deal of criticism has been focused on the Case-Shiller Home Price Index in particular. Though highly respected for many years, those were by and large the good years of rising prices. This index only follows 20 major metropolitan areas, with little coverage in the middle of the country. Critics say that, during difficult periods, this has presented a picture not indicative of reality for a great many market areas. The OFHEO does better, covering a great many more areas, including smaller cities.
One thing that both began to show in mid 2008 is a settling down of many markets, with a few still sliding in home values. Those few were the same ones who had meteoric rises in the last ten years, including markets in Florida, Arizona and California. The news media is never the early indicator of a change, as their information comes from sources with agendas of their own.
One recent news report did give a possible hint at positive changes. It is reported that large institutional and portfolio management companies are holding billions of dollars in investment money earmarked for depressed real estate, and that they are beginning to swoop in and pick up properties in all markets.
As individual investors, we don’t have the resources for market analysis that these huge companies employ, but we don’t need to pick the absolute bottom of the market either. When they start to move into markets, purchasing foreclosures, then we have advanced notice that we may want to do the same thing.
Of course, real estate is local, and each investor must study their individual markets carefully. There are bargains everywhere right now, and for every person who lost a home to foreclosure, there will need to be a rental home for their families.