This month, the company explores the turnover rate, which is the number of non-distressed sales divided by the total housing stock in a particular market. Pro Teck says this calculation is one of the most powerful and, yet, simplest leading indicators of the future direction of home prices.
The company’s data shows that the turnover rate hits bottom six to 18 months before the bottom in home prices. The relationship between turnover rate and sales price is highlighted with the numbers for Los Angeles and Miami-Dade counties.
The peak in sales in these markets occurred in 2005 and approximately a year before the peak in prices, according to the HomeValueForecast.com update. Sales then proceeded to drop sharply for the next few years until their low points in early 2009. After the 2009 trough, regular sales activity jumped sharply on a percentage basis and has been on an increasing trend ever since.
Pro Teck says its fundamental interpretation is that the significant decline in prices made home values so compelling that both new owner-occupant homebuyers and astute U.S. and foreign investors came into these markets. The new demand prevented further declines, creating the longer-term bouncing around the bottom in prices we are experiencing today, the company explained.
“Our data illustrates that many markets actually hit bottom in early 2009 despite others predicting that home prices had much further to fall,” said Tom O’Grady, president and CEO of Pro Teck Valuation Services.
“The Miami and Los Angeles markets are highly representative of what we foresee for most of the important coastal U.S. real estate markets,” O’Grady noted. “In particular, we see stabilizing and then gradually increasing prices over the next few years.”…
Read the rest of this article by DSNews.com here: “Forecasting Home Price Recovery: Turnover Rate as a Powerful Indicator“.