Has the Housing Market Bottomed?
In desperate economic times, everyone wants to know when it’s going to end. I’ve said before we won’t know bottom until long after it’s passed. Several national articles this week have suggested we’re bottoming now, but many in the real estate business have been calling bottom for quite some time.
While there is still quite some individual pain ahead, perhaps we’ve approached or reached bottom now? The experts write:
Oil hit another record high but has since pulled back. The dollar has finally started to show some signs of life. And for the most part, corporate earnings were - as Larry David would say - pretty pretty good.
Long term interest rates have risen sharply in the last two weeks with the 10 year bond gaining over 40 bps in that time frame. Stocks have
followed suit. Overall economic problems like fuel and food costs still exist, but it seems for the moment the markets have found a comfort level with those conditions. Another test will take place this coming week when the Fed again votes on interest rates. The markets are calling for another .25% rate cut, but more and more people are worried about inflation.
Duane LeGate, a foreclosure expert, said his data is showing bottom as well -
This may not be a popular opinion.. but we have hit bottom.. as in now.. every piece of data I have is suggesting something different than conventional wisdom.In 2006, we made the call for specific markets dropping 20%.. we hit them dead on… Bottom is where it hurts worst, and we are there..Now, in NO WAY am i suggesting we are in for an upturn.. just stabilization as it relates to housing prices…
As I talk to potential homeowners in previously bubble markets, I’m hearing optimism about prices. One person in California told me he was looking at houses in the $160-$180k range that had previously been $400k two years ago. That’s a 55% decline for those houses.
I calculated a payment for a borrower yesterday that was $300 less than what he was paying in rent. That payment included taxes and insurance. When it’s cheaper to buy than to rent, market sentiment will change.
Have we bottomed in Utah? No. We’re not even close. We’re probably 18 months away from bottom and there will be some pain and a bunch of foreclosures (read opportunities) before we get there.
The credit markets are still unknowns, but they do seem to be stabilizing. FHA is going to be the dominant loan program and down payments are going to become the norm. Except for VA, there are no 100% loan programs any more. If you’re going to buy, you’ll need a down payment.
I think the next nine months are going to be pivotal in determining the direction of the housing markets. Time will tell of course, but the signs of a bottom are definitely there.