Tuesday, October 9, 2012

Virtues Of Positive Thinking

Let me first say this is totally copied from a blog report I get weekly.  I have contacted the source and have asked to be able to link this directly to my blog and have not heard back yet. 

The reason I am posting this here is that the views and research that is being done here mirrors my beliefs and is very well stated.  I did not want to take credit for it directly.

Signs of positive growth are springing up all around us.  The only fear we are experiencing is being put there by our political representatives. 

Read this and enjoy.


Virtuosity
Sometimes our timing is uncanny. Or perhaps it is because we present so many opinions, a few coincidences are likely to happen. Regardless of the reason, a few weeks ago we started focusing on the elusive virtuous cycle. We concluded that the cycle must start with real estate and we indicated that there were signs that this might finally be taking place. Well, a few days ago, this quote appeared in a Wharton publication: Is this the start of the long-awaited and elusive housing recovery -- one that would bring a stronger economy overall? Or is the market just taunting us as it bumps along the bottom? 'It's for real. This is absolutely for real,' says Susan Wachter, professor of real estate at Wharton. The market, she says, is poised to enter a 'virtuous cycle' where positive trends will spur more positive trends. 'This market recovery will continue,' she added.  (See more from article in Real Estate News below.)
That is not to say that one person's opinion solidifies the deal. However, it appears that others are taking notice of the rebound that is taking shape. If we want confidence, positive remarks in the media from experts such as Susan Wachter are very important -- certainly more important than our comments. And we certainly do need additional confidence as we build another leg in the virtuous cycle. The employment report released on Friday showed that the recovery is continuing but we could still use more momentum. The drop in the unemployment rate from a high of just under 10% to 7.8% in a period of just under two years is significant. The road to an even lower unemployment rate must be underpinned by a stronger real estate recovery as part of the virtuous cycle. Perhaps it has already begun.
 
By the less-demanding standards of the past few years, the latest housing figures look pretty good. On September 25, the Standard & Poor’s Case-Shiller Home Price Index showed a 1.2% price gain in July compared to a year earlier. Prices have risen for three consecutive months. The National Association of Realtors (NAR) reported on September 26 that sales of existing homes had risen by 9.3% in August, compared to a year earlier, and that the median price of existing homes sold was up 9.5% over the past year. NAR and Case-Shiller use different methodologies. For the 12 months ended in July, sales of newly constructed homes were up about 25%, though the total was still only about half of the 700,000 units considered healthy. Experts are especially impressed that prices of the least-expensive third of homes lead the gains, going up a full 1% between June and July. Those homes had received the worst drubbing in the recent housing market collapse. Is this the start of the long-awaited and elusive housing recovery -- one that would bring a stronger economy overall? Or is the market just taunting us as it bumps along the bottom? 'It's for real. This is absolutely for real,' says Susan Wachter, professor of real estate at Wharton. The market, she says, is poised to enter a 'virtuous cycle' where positive trends will spur more positive trends. 'This market recovery will continue,' she says, predicting that rising prices will prod potential buyers to buy before prices go up more. That demand will nudge prices up, drawing in even more buyers. 'I have been optimistic about this market for six months or a year,' she adds. Several factors have combined to strengthen the market, Wachter says. Extraordinarily low rates have allowed millions of homeowners to reduce their monthly payments by refinancing. Moreover, Wachter notes, unemployment, while still high at over 8%, is not rising, and fewer workers feel the threat of layoffs. The stock market has been very strong, making those with investments feel wealthier. Worries about a shadow supply are easing. 'People are less likely to walk away when they see prices rising,' she says. Source: Knowledge at Wharton
More than 20 million rental households spent more than 30 percent of their income last year on rents. In fact, more than half of those renters spent at least half their income on housing, “severely burdening” their finances, according to Census data. Rents have been on the rise the last few years as demand surges. In the past seven years, median rent payments have soared nearly 20 percent from $728 to $871. Some markets have seen double-digit increases in rent in just the last year, such as in cities like Houston, Seattle, and the San Francisco Bay area where strong job markets are fueling high demand. 'More demand with little new supply means rising rents and shrinking vacancies,' says Jed Kolko, chief economist with the real estate Web site Trulia. Source: USA Today
Investors have a new target in real estate: undeveloped land. They're snatching up undeveloped land heavily discounted in bankruptcy proceedings from developers and banks that foreclosed on the builders once they ran out of money for their projects, Reuters reports. The investors then resell the land for up to 20 percent or more returns on their investment. Or, in a buy-and-hold strategy, the investors partner with homebuilders to develop the land. 'We are coming out of the mother of all housing cycles, and residential land is the best way to play the ultimate recovery,' Michael Barr, a Paulson & Co. portfolio manager, told Reuters. 'Land is the highest-returning component of the homebuilding equation.' Investors find the most attractive land to buy is a parcel that already has all the planning permissions in place to start construction. Otherwise, the approval process for building on the land from local and state agencies can be costly and timely. Source: Reuters
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