Five Signs That Say 'Buy'
The Wall Street Journal
FEBRUARY 26, 2011
Jobs. Some parts of the country were less affected by the recession
than others. Prospective buyers should review job-growth data from the U.S.
Bureau of Labor Statistics, at www.bls.gov. Unlike many backward-looking economic
statistics, jobs data are only about a month old and can "clearly show the direction
of the local economy," says Carolyn Beggs, chief operating officer of real-estate
data provider Local Market Monitor Inc. The National Association of Home Builders
also posts state and local employment data, at NAHB.com. You also want to see
a brightening personal-income picture for the previous six-month period. Those
numbers are available via the U.S. Dept. of Commerce's Bureau of Economic Analysis,
at www.bea.gov.
Recent sales activity. Three factors should be taken together: housing
inventory, sales volume and prices. A large inventory of homes with few actual
transactions are negative indicators, according to Jeffrey Jackson, chairman
of Mitchell, Maxwell & Jackson Inc., an appraisal company in New York.
On the other hand, if inventory is falling and transactions are picking up,
that is a good sign. State and local boards of realtors often publish monthly
inventory statistics. Inventory breakdown by metro area also can be found at
the U.S. Census Bureau's website, in the American Community Survey (www.census.gov/acs/www/).
Be sure to compare current inventories with long-term averages. Also, check
out the rental vacancy rates in your area, and judge them against historical
rates, which you can find at the Census Bureau's website (www.census.gov) or
via local real-estate professionals.
Construction. While not as reliable as jobs or sales-trend data for
getting a read on a local housing market, the number of permits recently issued
for local builders is useful for gauging builder sentiment and, by extension,
future housing activity. You can get recent permit information from your county
or municipal building department, or via the National Association of Home Builders
(www.nahb.com).
Mortgage availability. If you live in an area where most people use
mortgages, it is especially important now to gauge local lending patterns. In
the aftermath of the financial crisis, most national banks tightened lending
standards. But some local banks haven't been hit as hard by the housing crash
and are more willing to lend, even for higher-priced homes.
For instance, some smaller lenders in the New York and New Jersey area, such
as Lake Success, N.Y.-based Astoria Federal Savings, are actively courting new
"jumbo"-mortgage customers. Astoria Federal says it believes jumbo-loan borrowers
pose less risk than other borrowers because they can demonstrate ample income
and often opt for hefty down-payments.
Anecdotal evidence. It might sound old-fashioned in an era of electronic
data, but driving around neighborhoods, checking out open houses and talking
to local agents still are good ways to gather local-market intelligence. The
key is to do this kind of research only after you have gathered hard data, so
that you don't misread the signs. For example, foreclosed homes can generate
multiple bids and quick sales, often in all-cash deals—but that doesn't mean
the market is healthy.
—M.P. McQueen
