By: Richard Stoyeck
Submitted: 2009-09-30 10:50:17 | Word Count: 608
A mere glance at the leading financial papers in America would have you believe that real estate has bottomed, and is already on the ascent again. If you were to listen to the commentators or talking heads, they want you to believe that housing prices have bottomed, and are working their way up again. The evidence they would give is the dramatic increase in sales activity that the statistics are showing. Let’s look at some vital statistics that will better inform real estate investors as to what reality really is.
The National Association of Realtors reported in August of 2009 the following statement, Existing home sales rose in July for the fourth consecutive month”. They were up about 2.2 from June, the preceding month, and the numbers as expected, are adjusted for seasonal purposes. It seems outright bullish on the face of it, and that’s what the media wants you to believe. We say, not so fast. In our opinion, they are completely misleading the public. It’s intentional we think because they are biased.
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The real estate industry has a trade publication which is called “Inside Mortgage Finance”. We looked at the latest survey done for the professional real estate industry and this surprisingly is what we found. Now remember the talking heads on television never study this kind of material. The results of the survey were plain to see, but were written in such a way as to inform the professional real estate player and at the same time mislead casual reader. The publication pointed out that 36 of all sales involved what they referred to as “non distressed” properties. That’s more than one out of every three properties that were sold.
What does it really mean when you get right down to it? You have to reverse the numbers to get at the real meaning. It means that 64 or almost two thirds of all real estate sales involve DISTRESSED PROPERTY SALES. Think about it, if 36 is non distressed, than 64 must be distressed. They are trying to play with our brains to mislead us. This also means a huge number of real estate sales taking place in this country are buyers looking and acting only on properties that are in financial distress, plain and simple. This is not a bull market in real estate under any conditions that we can see.
There are more peculiarities evident. In a different section of the article, we discovered something else that was also misleading. Let’s look at only the non distressed sales for a moment which compose 36 of all real estate sales according to the survey. Non distressed to us means exactly that, non distressed, or voluntary. The article reveals that when dealing with so called “non distressed properties”, only 31 of them involved were “unforced or optional”.
The implications are clear to us that 69 of the sales which were termed non distressed property sales were “FORCED” for reasons not disclosed. A less than brilliant person could figure this one out. The conclusion is obvious. When you come right down to it, perhaps about 10 of the sales involving real estate in this country for the last several months was part of the normal sales process. That’s only one out of every ten house sales. The rest were the results of one of three things, foreclosures, and banks taking losses, or forced sales by the seller.
Real estate remains in the doldrums in this country and around the world. The problems were caused by the banks during the 2008 financial panic. It will be in our opinion several years before we can get back to a vibrant real estate market.
Author Resource:-
Richard Stoyeck's background includes being a limited partner at Bear Stearns, Senior VP at Lehman Brothers, Arthur Andersen, and KPMG. Educated at Pace University, NYU, & Harvard University, today he runs Rockefeller Capital Partners & http://StocksAtBottom.com. http://stocksatbottom.com
