Good Research Paper About The Future Of Real Estate

In late autumn in the United States have been published reports on sales volumes on both the primary and the secondary housing market. Thus, there are all the statistics on the US residential real estate market for the autumn. You can calmly analyze the data and find out what kind of picture emerges from these puzzles.

Let's start with the primary housing market:

The bad news is that the data for all three summer months in the last report have been revised downward. Especially sad that the number of sales at the end of August, as it turned out, were not 504,000 homes a year, as previously reported, but only 466,000. The number of sales at the end of September also somewhat disappointed, a little short of the expected level: The US Commerce Department reported 467 thousand homes sold during the year against the forecast of 470,000.
The good news is that sales in the primary market of the United States rose for the fourth consecutive month. Moreover, the output index to new post-crisis highs still occurred - let the record level and was still only 467,000, not 504,000. In any case, there is a breakdown of resistance in 2013-2014; located in the area of ​​460 thousand (see graph below). This means that the bullish trend in this sector of the housing market was confirmed. In the first nine months of this year, the market grew by 1.7% compared to the same period of the previous year.
But the market residential buildings is only 10% of the US housing market, most of which falls on the sale of secondary housing. What are the latest trends in this market? There are both bad and good news too. So far, the sales of existing US housing market did not reach the level of a year ago. In September 2014, the backlog of the level of September 2013 was 1.7%. And now let’s tell about the good news. The secondary housing market in the US September was recorded a new annual record - 5.17 million. Homes a year (see graph below). There is growing evidence that the correction of the second half of the past and the beginning of the year has passed and the indicator is aimed at new highs. The positive trend is also reflected in the price dynamics: in September last year, the median home price in the secondary market amounted to $ 199 200, in September this year it was $ 209 700. Thus, the prices rose by 5.3% during the last year.
It should also be noted that the FHFA House Price Index (HPI) is different from the index Case-Shiller. HPI index analyzes only houses with guarantees of mortgages by Freddie Mac and Fannie Mae. It means that home prices are lower than $417,000 (the threshold conforming level). This kind of mortgages is paid off only through cash transactions, as well as eliminates the FHFA HPI Jumbos. These entire features of HPI index more fairly reflect the main trend in the housing market (The FHFA HPI, 2015).
In September, housing prices were not volatile on a monthly basis. Currently, housing prices are at July 2005. A consumer spending and confidence are the main drivers of growth for the real estate market. The "underwater homeowners” phenomenon (those who owed more than the cost of the mortgage) was a major drag on economic growth. These "underwater" homeowners save money to pay debts. Therefore, they strongly affect the index of consumer spending and generally on the economy. Experts in the real estate and mortgage loans are closely monitoring such indicators.
The rising of real estate prices is useful for construction companies. Growth in property prices makes it possible for these companies to raise prices and increase its gross profit margin. However, buyers are now beginning to experience a shock. Prices and mortgage rates rose for the year that had gone. Construction companies have noticed these changes. Investors who are interested in investing in the construction sector may consider SPDR S & P Homebuilders ETF (XHB). House Price Index HPI has grown by + 3.9% compared to last year. The rate of growth in housing prices is slowing. While most of the indices showed that the housing market has bottomed out around February 2012, the index showed it to the bottom of the HPI in May 2011.
The real estate market in the past year has been “tightly” inventoried. Professional investors and private equity firms began to acquire property for a family and to lease them. Recently, however, professional investors have reduced their purchases.
Another economic problem is the lack of labor mobility. Some states have a disadvantage in the labor force and other excess. Unfortunately, the workers cannot easily navigate through the United States, if they fall into the category "underwater homeowners." This trend is associated with a decrease in participation rates in the labor force. When these "underwater homeowners" to repay their debt, they will sell their house and will go to where the jobs are.
Real estate prices are a strong driver of growth for the following investment trusts: CYS Investments Inc. (CYS), Newcastle Investment Corp. (NCT), RedwoodTrust, Inc. (RWT). At the same time, real estate prices do not affect much on such agencies for investments in real estate as Annaly Capital Management, Inc. (NLY), American Capital Agency Corp. (AGNC). Downward trend in real estate prices on the investment trusts is very important. Since these agencies are faced with the additional credit risk by investing in government mortgages. Recovering the real estate market has been uneven. Some states ahead of others. The graph below shows that the Pacific and Mountain states ahead of other states in the last two years. There are many reasons why some states may excel in other growth in property prices.
The revival of the real estate market in high energy-consuming states is also noticeable, such as Texas and North Dakota. These states provide high-paying jobs, attracting the most new employees. All this has created a housing shortage, especially in North Dakota. Detroit is gradually destroyed, empty entire neighborhoods. California is experiencing the benefits of the technology boom. All this is very important when investing in construction companies. If you select a company with the wrong geographic coverage, you may be disappointed by the results of such investments. For example, a construction company with geographical coverage on the west coast of KB Home (KBH) can be much more attractive than the company with the geographical coverage in the mid-Atlantic region NVR, Inc. (NVR).
Weighing all the "pros" and "cons" of the autumn statistics on housing sales, I come to the conclusion that these data to assess the prospects for the US housing market with cautious optimism. Yes, to return to pre-crisis level of sales remains to be done a long way. However, the gradual improvement of the situation is obvious. It seems that the market is slowly but surely overcome the difficulties encountered in the middle of last year against the backdrop of a significant increase in mortgage rates.

References

Downie, M. L. & Robson G. (2007) Automated Valuation Models: an international perspective. Pp 11 Council of Mortgage Lenders, London, ISBN 1-905257-12-0.
How is the HPI calculated? (2014) Accessed 22 February 2015
Lim, S. & Pavlou M. (2007) An improved national house price index using Land Registry data RICS research paper series: Volume 7 Number 11. Pp 10–14. London, ISBN 978-1-84219-347-1. Accessed 21 November 2007.