Does the February Rise in Sales Mean a Bottom is Near?

[Glenn Plantone]

Home sales soared nationwide in February leading many market analysts to wonder if the bottom has finally come for the distressed U.S. housing market. But it is important to note that sales also rose in December and September without a bottom arriving. Another important factor to consider is that even as home sales have risen, median home prices have continued to fall nationwide.

Steve Bottfeld, a real estate analyst with Marketing Solutions presented at our Real Estate Insider Club of Las Vegas last year and outlined a three point test to gauge the bottom of a real estate market. First, he looks at the inventory of homes listed on the local Multiple Listing Service (MLS). Second, he evaluates the sales data. (Sales rose in February.) Lastly, he considers the average median price of homes in the market...which, as of February, is still descending.

Bottfeld stated last year that the hold out factor in the data for the Las Vegas housing market was the median home price...and that appears to continue to be the case, not just in Las Vegas, but across the country as well. As soon as we see the median home price stabilize, according to Bottfeld, we will have found the true bottom of the market.

So what does all of this mean for us property investors looking to add to our portfolios? Should we hold off on purchasing property until the market reaches an identifiable bottom?

I think that the answer is a resounding “NO.†The key element to consider when purchasing investment real estate in a stagnate or declining market is cash flow. Cash flow is king. As long as an investment property cash flows at the time that you buy it, you will not have to count on appreciation to make your deal worth while. The property will continue to provide you with monthly income even if the value dips slightly before a bottom is reached. Any appreciation you do incur will be a bonus.