Housing Giants - June 10, 2008 - (Page 12)

market By John Burns and Chris Porter, John Burns Real Estate Consulting Back to Market Basics With home prices continuing to fall at a rapid rate, everyone wants to know when the housing market will reach bottom and when prices are expected to recover. Although nobody can predict the future and both good and bad times seem to continue longer than they should, a solid understanding of the fundamentals can serve as a leading indicator for price appreciation or depreciation in your markets. We are now incorporating our market fundamentals grades, which show the overall health of each metro area, into the market data we provide with this column. A composite of 24 variables of housing demand, supply and affordability, these grades show that improving fundamentals usually results in increasing appreciation and vice versa — sometimes with a 3- to 5-year lead time. The graph of the San Diego metro area (page 14) shows how improving market fundamentals in the Understanding whether your market makes the grade can tip you off to the housing recovery. mid-1980s and late-1990s preceded the home price appreciation of the late-1980s and early-2000s. It also shows how price appreciation continued to rise even as the market’s fundamentals eroded. Interestingly, some markets such as Seattle appear to appreciate in line with the fundamentals. We don’t consider any of the 20 largest housing markets to have healthy the Basics Here are some of the market fundamentals you should consider in determining how healthy your market is: DeManD Sales volume n Sales prices n Short-term appreciation n Medium-term appreciation n Job growth n Population growth n Employment growth/permit ratio Resale listings growth n Resale months of supply n n afforDaBility Housing costs in relation to incomes n Home equity levels n Mortgage rates n supply n n Recent permit growth Permits in relation to history 12 housing giants.6.10.08 WWW.housinggiants.com http://www.housinggiants.com

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