Bet you want to hear “UP, UP and AWAY! Knowing precisely when home prices will turn and reverse the slide experienced for the last year and a half would definitely make a real estate investor’s day. It’s like the stock market though. If someone tells you that they can predict a national turn in home prices … run.
That said, there are opportunities out there right now for those who want to do the research. The Case-Shiller and OFHEO home price indexes are both still trending down as of their last monthly release. However, the monthly drops have been getting smaller and smaller for their composite national indexes. Everybody has an opinion, but one you might want to give a little weight is that of Karl Case, the first name and co-developer of the widely respected Case-Shiller Index. Recently Mr. Case noted that the downward curve in the graph of the monthly Composite 20 Index was beginning to flatten out. He also pointed out that 9 of the 20 metropolitan areas in the Composite 20 Index had turned positive, with increases in prices in the last month or so.
An analyst article at SeekingAlpha.com, a financial and investment website, notes that he has closely followed two of the worst performing markets, Las Vegas and Sacramento. According to his statistics, the per square foot price of homes was flattening out from previous declines, August 2008 home sales were up significantly from August 2007, and inventories are dropping in these areas.
The truth of the matter is that the entire nation didn’t turn on a dime in a negative direction, and it will not do the opposite either. Certain areas showed weakness much earlier than others, and certain areas will now show strength well ahead of others. Therein lies our opportunity as real estate investors. It’s all in the research.
The OFHEO (Office of Federal Housing Enterprise Oversight) Home Price Index monitors a large number of towns and areas, far more than Case-Shiller. Start by checking the one nearest or including the area in which you’d like to invest. Does a chart show a turn in prices? That’s a good start. Then do what we do … look for individual property value.