Sales, Prices, Fall

Once again, existing home sales have fallen, according to the National Association of Realtors. October sales dropped 1.2 percent from September to 4.97 million, the fewest number since the NAR started tracking sales in 1999.

The year-to-year drop: a staggering 20.7 percent.

Median home prices also fell to $207,800.00, down 5.1 percent from a year ago.

So what’s the point? Why the attention to falling house prices, soaring foreclosures, and lower sales numbers? After all, the news is almost always beak; and when it’s not bleak, the news is only not-so-bleak. Why focus on it all?

It comes down to this: as a real estate investor, to be successful, you have to know and understand the broader forces at play in the overall real estate market. All of this has a direct, and potentially significant, effect on your business. If you don’t adjust or adapt your investment strategies, you can really set yourself up to get seriously hurt.

I’ve said it a thousand times: any closing from which you walk away with money in your pocket is a good one. Getting a check is much better than writing one.

As sales numbers fall, as prices fall, this is more true than ever.

Atlanta: On the Brink?

Standard and Poor’s September Case-Shiller home price numbers are out, and once again they reflect a sharp decline in prices nationwide. Third-quarter prices have dropped 1.7% from second-quarter levels, and the year-to-year decline is at 4.5%.

Overall, this reflects the largest drop in the 21-year history of the index.

There is mixed news for Atlanta. While Atlanta is only one of five cities in which prices have risen year-over-year (at a whopping 0.4% from Q3, 2006), prices have fallen 0.6 percent from their August levels. In other words: Atlanta is precipitously close to joining the rest of the country in seeing a decline in average home values.

Home Prices, Halloween Edition

Last week, Standard and Poor’s released the latest Case-Shiller home price index. Appropriately in time for Halloween, the numbers were scary, and US home prices were, on average, down for the eighth month in a row.

The index, which measures home prices in twenty cities across the country, showed a decline of 4.4% in the past year. The ten-city index was even worse, dropping 5% in the past twelve months, a level of retreat in home prices that hasn’t been seen since June of 1991.

There is one bright spot in all of this negative news. While the rest of the country may be reeling, average home prices in Atlanta are holding steady. Where Detroit, for example, saw prices drop 9.3%, Atlanta has shown a slight increase of .8% over the last year.

In real-world terms, a home worth a hundred thousand dollars a year ago has gained in value… eight hundred bucks.

While hardly a spectacular return on investment, it sure beats the alternative.

For real estate investors, this reinforces how important it is to measure a property’s value and how much potential equity a property may have. As a group, investors sometimes tend to overestimate equity, and in today’s marketplace, doing so can potentially be very costly. No longer are investors able to count on three to six percent per year appreciation of the property, and the days of automatically being able to increase a sales price to cover closing costs are now behind us.

While it seems that Atlanta has weathered the price storm so far, we can’t assume that it will continue to do so for too much longer. There undoubtedly will be additional downward pressure on home prices as foreclosures continue to increase and more homes are listed for sale. Combined with the additional scrutiny that lenders are viewing appraisals, it is more likely than not that prices in Atlanta will fall as well.

One Billion Dollars!

News on the local foreclosure front: according to Equity Depot, foreclosures in Atlanta have hit a record high: October foreclosures increased 38% over September, and almost 50% from October 2006.

The value of all of those homes? $1,076,975,783.00.

Cue Doctor Evil: One Billion Dollars.