Hi There!

I was goofing off today, and started looking through
www.craigslist.com for real estate.  I looked at 11 different cities
from San Francisco to Phoenix to Washington, D.C.

Mini-Eureka moment!  I noticed the number of lease-options available
has increased significantly in each and every city.  11 of 11 towns! 
The last time I checked www.craigslist.com was 5 months ago.

This observation sparked my rusty brain cells. There must be leading
indicators for real estate, in the same way there are leading
indicators for stocks.  Here's a list of possible danger signals for
real estate off the "top of my head":

1.  Increasing lease-options
2.  Increasing number of days on the market
3.  Increasing number of unsold homes in a city
4.  Decreasing ratio of Asking Price/Transaction Price
5.  Increasing number of homes on the market more than 120 days
6.  Decreasing number of mortgage applications
7.  Increasing number of newspaper classified ads for real estate

I'm not a real estate guy.  But I'm sure some brilliant professor has
devised a computer model to predict when real estate prices will
decline 6-12 months hence.

A 5-star answer would be 5-10 additional leading indicators for real
estate.  No background material needed.  (However, if you happen to
find an objective study on leading indicators then I would love to
take a look at that, too.)


All comments greatly appreciated!

Thanks.
ron


P.S.  Please note that indicators like "Forecasted Job Growth" or
"Forecasted Property Tax Receipts" won't help much, precisely because
they are forecasts and not hard data.  The best indicators would
involve hard numbers that can be observed right now, and used to make
comparisons.

EXAMPLES:

1.  Days on the market for San Francisco versus days on the market for Phoenix.
2.  Days on the market for San Francisco in April 2005 versus days on
the market in San Francisco in January 2002.


(This question doesn't involve specific numbers or specific cities. 
Rather, it involves the kind of indicators one might observe.  Thx.)

Hi! Thanks for the question.

The National Association of Realtors provides a list of real estate
indicators that one can analyze to indicate some trends. Here are some
of the indicators that they follow:

- Existing Home Sales
- Pending Home Sales Index
- New Home Sales
- Housing Starts
- Housing Affordability
- Mortgage Rates
- Mortgage Applications

?Latest Economic Indicators?
http://www.realtor.org/Research.nsf/Pages/EcoIndicator


The US Census website provides a historical basis for its leading
indicators for real estate. The statistics are from 1900 to 2002.

The indicators mentioned in the Census website are the following:

- New housing units started 
- New one family houses sold
- Existing one family houses sold
- Manufacturing shipments
- Index of industrial production
- Manufacturing index
- Retail Sales
- Exports Basis
- General Imports

?No. HS-40. Economic Indicators for Construction, Real Estate, Manufacturing,
Retail, and Foreign Trade Sectors: 1900 to 2002?
http://www.census.gov/statab/hist/HS-40.pdf 


Finally, here is an academic study about real estate prices.

?Real Estate Prices and Economic Cycles?
http://urbanpolicy.berkeley.edu/pdf/Q_IRER99PB.pdf


Search terms used:  
?real estate? housing economic indicators
studies real estate prices filetype:pdf

I hope these links would help you in your research. Before rating this
answer, please ask for a clarification if you have a question or if
you would need further information.
                             
Thanks for visiting us.                              
                              
Regards,                              
Easterangel-ga                              
Google Answers Researcher

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Request for Answer Clarification by nronronronro-ga on 20 May 2005 15:33 PDT

Alas, Phil...only the women in my life are cash-flow positive.  That
is to say, they stay positive when I let the cash flow.

heh  heh  heh


Thanks for your great insights, Phil.  As always!
ron

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Clarification of Answer by easterangel-ga on 20 May 2005 17:43 PDT

Hi!

Sorry about this but I just have to make a reply to clarifications.

Sincerely.
Easterangel

Heavenly answer, easterangel.

As always, thanks a million !
ron

You're welcome as well.

Since we're doing some work on the house in DC, I've been paying more
attention that usual to the real estate pages of the Washington Post.

One of the sort-of-indicators that they mention often is the
increasing amount of property that is bought as an investment, rather
than as a first home.  They also cite the increasing trends in
2nd-home sales.

For both of these though, I don't know if there's an actual statistic,
or just the observation of people in the business.

Nice work, though, easterangel.


paf

Thanks, pafalafa!

My business partner just purchased a home across the street from the
National Cathedral.  He obviously checked out DC.  He found the "PMI
Risk Index" for DC was very low, whereas the same PMI Risk Index for
my state (California) was very high.  The only place more risky than
San Francisco/San Jose was Boston.

Rut Row !
ron

Ron,

Your application of logic is spot on.

Your points 1 to 7 could relate to any real estate market.
In fact, I had counted the number of "for sale" ads by COLUMN
not just the pages. I also counted the number of properties
for lease. Another gauge might be to weigh the newspaper, or
in the least the real estate section. 

I reckon that the more "for lease" properties tells us a lot 
about the climate of the sale market. An increase in borrowing 
rates will impact on the rental rates and realised sale prices,
regardless of the asking prices published. Check also the auction
clearance rates.

Have you sourced any cash-flow positive properties of late?

Phil

Alas, Phil...only the women in my life are cash-flow positive.  That
is to say, they stay positive when I let the cash flow.

heh  heh  heh


Thanks for your great insights, Phil.  As always!
ron