Forecasting the Bottom of the Housing Market

Housing Recovery As the U.S. government attempts to repair the broken capitalistic system and come up with a full housing rescue plan, hopes rise that the troubled market will recover from the worst economic housing depression in history. The bottom of housing market price deflation is now forecast by Housing Predictor to develop in the final quarter of 2010.

Bottoms of housing markets begin to develop as more people buy homes at lower prices and are scattered from market to market throughout the country. Unlike other business markets, housing markets don’t bottom all at the same time and recovery develops over a longer period of time. As a consequence, there’s really no national bottom to the housing market even though many people talk as though that is the case.

New data illustrates a troubled economy exasperated by a worsening financial crisis, rising unemployment, record low new housing starts, all-time record foreclosures and a sharp drop in multi-family construction.

However, improving home sales in many of the hardest hit areas of the country also portray a portrait of housing markets that are making inroads to recovery. Home sale prices are still falling in the majority of the country, including markets in California, Florida, Ohio, Indiana and Michigan, despite mixed signals that some markets were starting recoveries.

The signs of what some interpret as a bottom; however, demonstrate more of a ground swelling of the first signs of a recovery triggered by more sales as a result of record low interest rates and the federal $8,000 tax credit for first time home buyers. In economic terms the government is micro-managing the housing market by incentivizing the marketplace with the tax credit, and at least to some degree it’s working. The majority of the nation’s markets are experiencing more home sales in time for the summer selling season.

Stabilizing forces are beginning to make a difference at least in part due to the Obama administration’s housing recovery plan.

The pro-longed economic downturn is taking years to reach a full turn for the better as housing values deflate due to the epidemic of foreclosures. In the Savings and Loan scandal, which peaked in 1989 the government didn’t react quick enough to make any real difference to stabilize real estate markets. The same seems to be the case today as the White House and Congress politicize economic decisions. Politics have a way of becoming a part of the economic decisions of a nation. Few political leaders these days seem to vote out of conscience, but are motivated by other factors. Political favors have gotten in the way of economic good sense.

The housing bubble was artificially inflated by a series of forces, including deregulation of mortgage-backed securities, an over-extension of mortgages, and interest rates that were kept too low for too long by the Fed. Add record mortgage fraud and specially created new mortgage programs to the mix and the cocktail became an explosive mix that blew-up the world’s economy.

More than three years have now passed after markets began to level off from the real estate bubble in the hardest hit areas of the country, California and Florida. But until lenders can get the record high number of foreclosures sold prices will continue to slide, and that’s why the bottom of the housing market won’t begin to hit in most areas of the country until at least late in 2010. It takes a long time to sell-off a record excess inventory of bargain property.

The foreclosure market is robust, and forecasts indicate the number of foreclosures available for sale will increase in coming months.

Loosening up mortgage financing is also critical to healing markets. The capital system is under going change as new laws and regulations are put in place to recapitalize the markets. The transition to the new economy is anything but swift.

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