Are We At Market Bottom – Part 3

 The Wall Street Journal has now weighed in with an opinion column  “The Housing Crisis Is Over”.     In and opinion written by Cyril Moulle-Berteaus, The Journal says “yes, the housing market is bottoming right now”.   The writer makes a key point “the current housing bust is almost three years old.”   The sale of homes peaked in July 2005 and new home sales are now down 63% from their peak levels.

The magic sauce is affordability – read monthly payments.  Since the peak, home prices have fallen 10% to 15% while incomes have continued to grow.  Kick in the fact that interest rates are down 70 basis points and we have the makings of a bottom.   

There is still a lot of inventory, but the inventory levels are starting to go down (see Part 2).  If prices start to stabilize, we should see foreclosures level out and start to decline because fewer homeowners will be underwater.

Will we see a rapid recovery?  No Way!  Remember we are talking about finding a bottom.   We may still have a few rough quarters to go through.   It may take years for the Cincinnati real estate market to fully recover.   It may take parts of Flordia a lot longer!  

In 5 years when we look back we will remember idiot phrases like “Home prices never go down” along with “The Real Estate Market will continue to drop another 30% beyond 2008 levels”.   The truth is we live in a world of business cycles.   We have to live with boom markets and bust markets.    At the end of the day we all need a home to live in and affordable credit makes the entire market work.   The Credit Crisis is easing and homes are affordable – so we should be entering a market bottom.

This is the third installment in the Are We At The Market Bottom series.  You can find the previous articles at:

1. Are We At Market Bottom
2. Are We At Market Bottom – Part 2