If you’ve followed news about the housing market lately, you know that it’s been difficult to get a clear picture of its condition. Has the market reached rock bottom? Is it finally recovering? If not, when will it turn around?
Unfortunately, no one knows how housing prices will trend in the future. However, wading through all of the new information about the market can help homeowners and homebuyers make important financial decisions. Here’s a closer look at what’s going on:
What you should know if you own a home
In April, home prices in several major US cities rose for the first time in 8 months. Part of the uptick in prices could be attributed to the beginning of spring; many analysts believe that spring marks the beginning of buying season, driving demand (and prices) for housing up. We also received a small piece of good news in May: pending home sales were up 12% since May 2010, a possible sign that the housing market has improved compared to last year.
The recent news confirms that the pace of the housing market recovery will be gradual. At some point, home prices will rebound; I’ve even seen home prices in several areas throughout the San Gabriel Valley begin to stabilize. Although the path to stability may continue to be bumpy, homeowners should have confidence that property values will tick upward as the economy grows stronger.
What you should know if you want to buy a home
In May, home sales reached a new low in 2011, a key indication that potential home buyers are still not comfortable jumping back into the housing market. The data also revealed that first time homebuyers are increasingly hesitant, as they accounted for only 35% of sales ‘” well below average in a healthy housing market.
With so much unease in the housing market, the tepid pace of sales is no surprise. Buying a home is a special investment. Unlike stocks, bonds, or retirement holdings, your home serves a dual purpose: you must manage it as an investment and, hopefully, be comfortable living in it. An ideal home is affordable, meets your needs, and gives you a quality return on your investment over time.
Fortunately, I think the luck of potential homebuyers is improving. The large glut of previously occupied homes on the market means that there are some incredible investment opportunities out there. If you’re looking for a home, make note of ongoing developments in the housing market and do thorough background research on your neighborhood of choice. Make sure you’re aware of important factors such as local home prices, the history of property values in the neighborhood, and the potential for the neighborhood’s future growth before you commit. Good luck!
Alan Whitman is a Financial Advisor with the Global Wealth Management Division of Morgan Stanley Smith Barney in Los Angeles. The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Smith Barney LLC, Member SIPC, or its affiliates.