By Todd Denning
Everyone wants to know when the real estate market is going to bounce back. In some parts of the country there have been signs that the market is shifting in a favorable direction, but still many potential homeowners, investors and sellers are still too spooked to make a move - unless they are forced to. If you have the luxury to wait out the real estate market to sell, buy or invest, there are several key signs that you can watch for that indicate the health of the industry. Nationally, home prices, sales volume, and the foreclosure rate are all indicators that can be used to evaluate the health and well-being of the real estate market. But, because the industry is highly localized, with pockets that are doing exceptional well and other areas that are doing worse than the average, you have to look at the indicators in your particular area. Here are some performances indicators that can help you decide what the outlook is where you want to buy:
Price: The Standard & Poor Case-Shiller Home Price Index offers perhaps the most reliable information on home prices in the country. This index tracks the percent increase and decrease in home prices by month, quarter and year and will help you find which areas have fallen, stabilized or even begun to grow in price.
Affordability: The National Association of Realtors Housing Affordability Index reports the median income required to qualify for a conventional loan (20% down) for a median-priced single family home. In late 2010, a Wall Street Journal report noted that, on a national average, the cost of a home is 19 months of pay for the typical family, a 35 year low.
Foreclosure Rate: The foreclosure rate is a major problem in a down real estate market because it is like a disease that starts to drive down other home prices in the area. RealtyTrac, follows the foreclosure rate and says that 26% of homes sold in 2010 were foreclosures, down a small amount from the preceding year. The healthier a real estate market, the fewer foreclosures in the area.
Late Payments: The level of mortgage payment delinquencies can also predict the health of the real estate market. The lower the delinquency rate, the better shape the real estate market is in. According to the Mortgage Bankers Association, these rates have fallen to their lowest levels since late 2009. Loans that were one payment past due were at just over 8% in December 2010.
Inventory: The inventory of homes in the area positively correlates to a healthy real estate market. Ideally, economists say that a 6 month supply represents a robust market.
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