Confusion runs rampant. What is happening with foreclosures? What is the trend in home prices? How about overall inflation? What about the debt crisis? And is the NFL going to play this season?
From reading the headlines, there are definitely mixed signals. We all remember how one year after the expiration of the tax credits there was a significant drop in home sales. (And to think that some people were taking these "statistics" seriously!)
Now we are getting mixed signals about the state of foreclosures. Foreclosures are down this year over last year. Does anybody remember the "Repogate" crisis that hit last fall? Banks were withdrawing REO's from the market and implementing foreclosure freezes. There are some counties in my area where the number of foreclosures at Sheriff Sales are at about half the level of a year ago. For the most part two significant lenders (Bank of America and Chase) have had very few foreclosures in the past six months.
When some of the frozen foreclosures are resumed we can probably expect to see headlines about how foreclosures have increased by some large percentage and how the sky is falling.
Home prices are based on supply and demand. In most areas there is plenty of supply. The demand has decreased, in part because of people's fear of the economy and in part because of tightening standards to qualify for a mortgage. This climate promotes the low interest rates we are seeing now. As confidence increases, we can expect to see upward pressure on interest rates.
There are those who think that we are in a continuing pattern of deflation or extremely low inflation. And there are those who think that large inflation is coming. While some are buying up precious metals, the real inflation hedge just might be rental real estate. Even if there is no significant increase in the levels of inflation, rental property can bring about cash flow.
The news is full of information, but often it takes quite a bit of thought to understand what is really going on. Five years ago, with steadily increasing real estate values, some might have thought that we were in the best of times. Five years from now, we might be looking back at the plentiful supply of very affordable favorably price homes at low interest rates and we might be saying that 2011 was the best of times.
For information about the highly affordable Indianapolis-Carmel Indiana real estate market, you can contact me or visit my website.
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