Did Your Nest Egg Gain from the Coronavirus Crash?

Sick buying high & selling low? Fed up of the fees you pay? Tired researching investments? End your financial pain now. You have the opportunity to earn superior returns with low expenses, low risk, and minimal effort.

For a change, you will actually buy low, sell high, and keep what you earn. Register free and test drive AlphaProfit Premium Service investment newsletter now.


Is the Housing Recovery for Real?

The housing market is sending mixed signals. Home sales are rising. Foreclosures are increasing too. Is the worst really over for housing?

Rising Sales of New and Existing Homes

Sales of existing and new homes are increasing. In July, total sales of new and existing homes rose to a 5.673 million annual rate, the highest since November 2007. The steep decline in home prices, low mortgage rates, and an $8,000 tax credit for first-time buyers have helped to prop up demand.

Foreclosures Show No Signs of Abating

Rising unemployment is causing increasing number of homeowners to default on their mortgages. Foreclosures have spiked particularly in states like Nevada, Florida, and California. According to RealtyTrac, 358,471 U. S. properties received a foreclosure notice in August. This represents an 18% increase from August 2008.

Home Prices Tick Up

Even though foreclosures are on the rise, strong increases in sales are helping the housing market to stabilize and enabling home prices to stage a modest rebound.

The S&P/Case Shiller Index which tracks home prices advanced 1.4% in June, its second straight monthly gain.

So, are home prices about to rebound?

Getting a handle on leading indicators for supply of and demand for homes can help in assessing where home prices are likely headed.

Supply of Homes

The news here is mixed.

Rising foreclosures are a concern. They continually bring distressed properties into the market and add to the inventory of unsold homes. Things can get ugly if unemployment rate ticks up to double-digits and causes foreclosure rates to increase further.

Supply from new construction is not nearly a concern as much. The Commerce Department recently stated that housing starts in July tallied 587,000, down 1% from June.

Building permits, an indication of future construction activity, too declined 1.8% to a seasonally adjusted annual rate of 560,000 in July. Number of building permits issued in July 2008 is nearly 40% lower than a year-ago prior to the financial meltdown.

New Homes Building Permits Chart

Demand for Homes

It is useful to look at a leading indicator like pending home sales that track contract signings.

The National Association of Realtors recently announced that pending home sales gained 3.2% in July. This follows a 3.6% increase in June. Such strength in contract signings augurs well for home sales going forward.

Existing Home Sales Up Despite Foreclosures
Buyers are however turning frugal with their home purchases. The Commerce Department’s data show that sales of new homes costing less than $200,000 accounted for nearly half of all sales in the first half of 2009. The average size of new homes is down to 2,065 square feet.

All said, the housing market appears to have stabilized. As long as the job market doesn’t get much worse and mortgage rates don’t rise too much, home sales should continue to trend upward and help home prices to recover further.

The strength of the recovery is likely to be subdued and drawn-out as high levels of foreclosures offset restraint on new construction.

The investment implications of this analysis are discussed in a separate article titled 3 Housing Investments Best Suited for a Recovery.

 

Must-read Articles on Sector Investing

Using Sector Funds to Construct Diversified Mutual Fund Portfolios

High-potential diversified portfolios can be constructed by dividing assets among a group of sector funds. This approach gives the investor flexibility to over-weight or under-weight certain sectors versus broadly diversified indexes. 'Sector funds are too risky.' 'I doubled my money with Fidelity Select Technology in 12 months!' 'Avoid sector funds.' If all of this sounds confusing, you are not alone.

Sector Mutual Funds: How to Pick Winning Sector Funds and Avoid Losers

If you are looking to earn great returns from the stock market sector mutual funds are right up your alley. Sophisticated investors recognize the potential sector mutual funds offer and know how to make such funds work for them. You can consistently beat the market by investing in the right sector mutual fund at the right time. In fact, you can make money even in bear markets.

Sector ETFs: Invest in the Best Sector ETF Consistently

Sector ETFs are among the most potent investment vehicles that allow individual investors to exploit advantages previously available only to large institutions. You can beat the market by investing in the right sector ETF at the right time. In fact, you can actually make money even when the overall market is tanking. However all too often, investors use sector ETFs inappropriately and get their fingers burnt.


New Mutual Fund Recommendations

The AlphaProfit no-load, no-transaction fee growth model portfolio is up 330% since the start of 2009 compared to the 232% gain for its benchmark. The model portfolio was reconstituted with new recommendations on Friday, November 19. Learn more about AlphaProfit's Free and Premium Service investment newsletters.



Recent MoneyMatters Blog Posts