Wednesday, August 29, 2007
In the last week, existing home sales hit a five-year low, the inventory-to-sales ratio hit a 16-year high, and housing prices posted their biggest drop since 1987.
Amidst all this bad news, it's important to realize that not every market in the U.S. is falling like a stone. Nationwide, the trend may be heading downward, but there are individual real estate markets where prices are still strong if not rising.
According to the National Association of Realtors, sales fell by 2.2% in the Midwest. However, in the South, sales were still strong... and they actually rose by 1.8% and 1% in the West and Northeast, respectively.
And I'm willing to bet sales are going to rise even more in the markets that are currently showing strength. Let me explain...
Home sales work in the present... but land sales look two to three years into the future. Between zoning, engineering, and other regulatory hurdles, it often takes two years or more to prepare a piece of land for development.
Because of this, large real estate and homebuilding companies try to plan two to three years down the road. So when they see sales are still strong in certain markets while sales in other markets are collapsing, they see those strong markets as the next areas to invest in. They swoop in and buy up big tracts of land... sometimes as much as 3,000 acres at a time.
As the big players gobble up land in large chunks, prices begin to rise. Even small developers who only own a couple of lots will see the value of their land soar in a relatively small time. I've covered a similar situation in Nashville, Tennessee. But I bet there are at least 10 other areas in the U.S. where it's still happening.
It's time to look to the future. As the rest of the country focuses on bad news, key players in the real estate markets are already moving toward the future. And they're getting land on the cheap thanks to the pessimism surrounding the homebuilding industry right now.
That's why I'm hitting the road in search of good real estate buys. I know they're out there. And I'm going to find them.
If you currently live in or know someone who lives in a market where real estate is still healthy, drop me a line at [email protected].
Let's learn what's really going on... one town at a time.
See you soon,
Homebuilders get hit again... D.R. Horton, Levitt, Hovnanian, Lennar, M/I Homes, and Centex all at 52-week lows.
The market doesn't like Florida real estate... Florida developer St. Joe down 48% since May.