With new home construction hovering at record low levels it makes one think that existing home sales should be rising. Instead existing home sales remain in decline. The decline is evident though and happened again in January after a huge drop in December.
In January Existing Home Sales fell by 7% after falling 17% in Decemberaccording to the National Association of Realtors. So what’s going on and how are investors benefiting from this? Well a number of things are happening but a couple of them stand out. The Turnover Rate is in decline, now just above 6% (down from 9.5% in 2005. This is the percentage of all homes reselling in a year. Frankly people aren’t moving as much. Corporations are reluctant to transfer people on a whim and pay them to relocate. Also in the last 60 days, the weather has been anything but cooperative around the country. Here in Memphis where my own home is on the market (become of a relocation, ironic, isn’t it?), low temperatures are keeping people inside instead of house hunting. This can have a larger impact than most would believe.
Investors are using low home sales numbers and looming foreclosures hitting the market to negotiate prices with motivated sellers, banks, and investment companies. Despite the declines in the number of sales, the prices are remaining consistent and even increasing (7 months in a row of price increases). Although I suspect foreclosures peaking in 2010 will keep prices from advancing much further.
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