By Kevin Grewal, editorial director at www.SmartStops.net
NEW YORK (
) -- Despite some recent encouraging indicators, It may be a little premature to believe that the real estate market has hit bottom.
S&P 500 and Nasdaq Set Intraday Record Highs on Recovery Optimism
Stocks rise as jobless claims fall and durable goods orders climb at the fastest pace since the beginning of the year.
To be sure, the housing sector got a boost when the most recent U.S. construction numbers was up unexpectedly and sales of new homes rose 11% to an annual seasonally adjusted rate of 384,000, the largest increase in the last eight years.
In addition, U.S. GDP for the second quarter of the year contracted at an annualized rate of 1%, much smaller than economists had anticipated.
Still, one must keep in mind that new home sales prices have plummeted 12% to a median of $206,200, mortgage rates have risen, credit markets are still tighter than they were during the past real estate boom, consumer credit is starting to feel the effects of a prolonged recession causing FICO scores to drop, and the ability to obtain home mortgages is still relatively difficult.
Additionally, the employment market is still not seeing much help as wary employers just aren't hiring. The final nail in the coffin came from the most recent data released by the Labor Department which indicated that Americans receiving unemployment benefits fell to 6.2 million from 6.23 million last week, suggesting that some are starting to run out of their unemployment benefits.
With this in mind, it is tough to say that the real estate market is in recovery mode because it is the consumer that will drive and sustain a recovery.
However, the sector has seen a nice uptrend. Investors considering playing the real estate market should be aware of the risks involved with it and have an exit strategy to mitigate these risks. Price levels at which real estate based equities would be in trouble and indicate that an uptrend could be coming to an end can be found at www.SmartStops.net and are updated daily as the markets fluctuate.
The uptrend in the sector can be evidenced through the following equities:
iShares Dow Jones US Real Estate
, which is up 61% from a March low of $22.21 to close at $35.85 on July 31. It a SmartStop set at $32.25.
Ultra Real Estate ProShares
has more than doubled from its March low of $2.03 to a $4.28 close on July 31. The SmartStop is set at $3.61.
Simon Property Group
closed at $55.72 on July 31, up 113% from a $26.19 close in March. It has a SmartStop at $49.86.
rebounded nicely from a $48.05 March low to a $72.57 July 31 close, an increase of 51%. It has a SmartStop at $65.69.
Written by Kevin Grewal in Laguna Niguel, Ca.