Wednesday, December 30, 2009

ProActive Investors: Market Analysis

We have already warned in our past blogs that real estate investing is active, and requires diligence and determined effort. Another important quality of the most successful investors is that they are cognizant of current trends and events before the crowd has recognized what is coming. Every savvy investor needs to be watching real estate related stocks and analyzing what it means in investment direction and opportunity.

For example, let’s look at a recent better-than-expected profit report from Lowes, the home improvement retailer. This report caused positive reactions from analysts, leading to suggestions of investor confidence in an economic rebound, and consequently, stocks rose about 3%. This was interesting news, particularly in light of the seemingly conflicting report that Lowes first quarter earnings of $476 million were the company’s lowest for that period since 2004.
The investor's job is to take this information, and use it in guiding investment decisions.Further delving into the Lowes situation revealed that consumers were continuing to avoid big ticket renovation projects. This was traditionally the backbone of Lowes bottom line. However, surprisingly, do-it-yourself oriented products such as paint and hardware sales increased. That, in conjunction with improving consumer confidence, and slowing home price declines suggested the economy was stabilizing. This may suggest the worst is over, and a recovery may be slowly on the way.

While home prices remain low and property owners still unsure of the future, now could be the optimal time to deal. There is hesitancy in large home renovation, suggesting that confidence is shakey, but the slowly rising tide of small improvements indicate fingers in the economic winds. When consumers are convinced housing prices have hit bottom, they tend to spend more on their homes.In conjunction with the Lowes report, the National Association of Home Builders reported rises in its housing market index. It may be carpe diem time, and the investor who scrutinizes these kinds of economic indicators will emerge most successfully.

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