Enough already! Economy this! Housing market that! It feels as if we have been bombarded with mostly negative news forever. Every month Gardner, Olathe & Spring Hill would-be home sellers and Image: Surachai / FreeDigitalPhotos.net prospective buyers hope for signs that the economy has turned around, and December was no exception. But despite the relatively good news that unemployment numbers continue to show promise, the question remains: just how will we know when the Kansas City real estate market begins its upswing in earnest?

Market forecasting is always a bit like reading tea leaves or speculating on stock, but for a change let’s take a look at the three largest areas that could be indicators of positive economic signs for a real estate recovery:

Shrinking Inventory

Inventory is one of those real estate terms that can be misunderstood by anyone who thinks of its everyday meaning. Instead of being the total number of homes on the market, in real estate the term “inventory” is often expressed in months. It describes how long it would take to sell all the homes currently on the market if no new homes were listed.

When housing inventory shrinks, it means people are buying homes – a solid positive economic sign for real estate. While there are currently signs of shrinkage nationwide, the experts remain cautious due to what is known as the “shadow inventory.” These are homes that are in the foreclosure process but not yet on the market. It also includes those homes owned by folks who are putting off selling until prices recover. The experts at CoreLogic estimate that fourth quarter of 2011 there was a five-month’s supply of shadow inventory. This may increase as lenders release more distressed properties onto the market.

Among the most important economic signs to keep your eye on are the unemployment numbers. Rampant unemployment -- and the resultant concern over job security -- drags down consumer confidence Kansas City and everywhere else. But when people begin to get back to work, confidence always builds. That is why it was an early positive sign for the real estate industry when the U.S. Labor Department came out with its November unemployment numbers. They are falling, and now sit at 8.6% which is the lowest level in over two years. According to the Washington Post, the broader figures suggested that while this improvement may be modest it is also “widespread”.

New Housing Starts

When the economy begins to look healthy, homebuilders begin construction. Getting that right is of vital importance to them. Signs of a recovering new home market began back in September when construction increased a healthy 15%, according to RisMedia. While the experts consider this an optimistic sign, they again urge caution.

So while the economic recovery is still sluggish, there are some stirrings that the worst may be over. If so, one implication for Kansas City homeowners and potential buyers is that keeping an eye on market trends is once again a good idea.
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