Why recent bad news can be in fact optimistic news for Realtors

February 26, 2009

 Today the Commerce Department reported that sales of new homes fell 10.2 percent - the worst showing on records going back to 1963.

 You may think that this is bad news.  But it's actually a good sign.  My apologies to those who make their money in new construction, but not adding to housing inventory is a definite move in the right direction.

 The report also mentioned that the median sales price fell to $201,100 in January (dropping 9.9% from December 2008).  The average home price dropped 9.8% from December and is now listed at $234,600.  There are over a million homes in pre-foreclosure or foreclosure.  More bad news you say?  Not necessarily. 

The population of this country has not been ravaged by plague or a major hostile invasion.  In fact we are still growing by about 3 million a year due to new births and immigration. We are not experiencing a decrease in housing demand, just a shift of ownership.

 With more and more tenants looking for rental property because they are not eligible to purchase (either because they've been foreclosed on or cannot now obtain financing due to stricter mortgage guidelines), the ROI of properties bought for investment purposes will increase.  It's a simple fact of supply and demand.

 When property values drop low enough and the median rent increases to a point where the majority of investors (seasoned and astute newbies) perceive tremendous advantages to owning investment properties, we will start to see a flurry of purchases.

 If I was proposing additional stimulus measures, I would give tax credits to investors who purchase homes for rental properties and hold them for at least 5 years.  In my opinion, investors will be on the front lines of our housing recovery.

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