Is the Housing Bust Really Over?

Question

The Wall Street Journal reported today that, “the housing market has turned – at last.” It says that the Case/Shiller housing price index is finally showing the first monthly increase in house price data, after 7 months of decline.

But is this report a little premature? Some economists will say it’s on a slow upturn while others say it’s not over yet. No one really knows how much shadow inventory is still out there and many only speculate on plans for releasing this inventory.

Although this report from the Wall St. Journal is indeed positive, is it too premature? Personally I think bubbles come from speculation, and I think this “upturn” is just more speculation.  Please share your opinions.

Ramon Jenkins · Answer

I would disagree for Wisconsin

We had over 680 sheriff property for sales in 30 days
‘ for sale not purchase “

inner city has a lot of foreclosure

nicer smaller communities our filled 
with houses for sale over 2 years on MLS

a lot of property inventory  ( Wisconsin region )

Plenty apartment bldgs with “ for rent “

Karen Margrave · Answer

I do believe there will be many more REOs coming onto the market, so from an investors vantage point there will be opportunities.

However; for the economy as a whole, I think it's going to get worse before it gets better. Until we find out what is happening in November I don't think we'll see a lot of movement on the economy. Without policies for real job growth,and a plan to get America opened back up for business, I don't see where we will have the jobs needed to spur growth, or the confidence for buyers to jump in.

There are pockets that are good (Orange County, CA), and buyers are starting to drive up prices in certain price ranges. However; in a state like California there are many areas (far northern California and valleys) that are so depressed it will be 10 years before they start to grow, and that may be optimistic.

Jake Kucheck · Answer

The majority of the problem in the housing bubble stemmed from an artificially high supply of buyers.  When you take away that over-supply (tighten-or, better put, "implement" lending criteria), you are going to drive down demand for housing, while keeping supply relatively constant (actually, due to rampant builder production, supply increased even though demand decreased).  These factors all work to drive price way, way, down.. especially in areas particularly susceptible to boom/bust cycles (see CA,NV,AZ,FL).

The majority of the problem in this "mini-boom" is again supply, except this time it is the artificially LOW supply of homes.  There certainly aren't more qualified buyers than there were in the boom, so that can't be what is driving price growth.  It is simply homes that should be on the market that are not.  Only when we get rid of all of these can we see a legitimate turn.  Of course, we'll have to keep constant or increase the supply of buyers in the interim, which may not be easy to do with unemployment and the economy where they are now.

Account Closed · Answer

No,  I believe we have several more years yet before we see a real turn.  The unemployment situation is far more worse than the number might suggest.  It becomes much harder for people to find work when they haven't worked for a couple of years.

There are many homes yet that the banks are holding on to.  There are many more homes that are in the foreclosure process.

To much suggests  that we may have a double dip in housing prices.

Rich Weese · Answer

I've been on the record for awhile believing the worst is NOT over. I'm moving to cash to take advantage of 2nd wave. I hope everyone else is out of money from buying in the first wave....Wishful thinking, maybe. Rich

Steve Babiak · Answer

Are we sure it's a real trend and not just a spring and summer spike?

Ryan M. · Answer

I read that too and agree with it, foreclosures this month are on a uptick locally.

Eric L. · Answer

No, we are no where near out of the woods yet. FHA just announced today that their foreclosures are up 25%. They will be too expensive to fund soon and there will be no such thing as a 3% down loan for first time homebuyers.

The house market is being propped up with low interest rates. This will work fine as long as the economy is humming along and it props up inflation along with it.

The issue is that the economy is not doing well and we are halfway into Japan's lost decade of cheap interest rates, debt, and no growth. Wages are not growing and when interest rates rates come back, people won't be able to afford to buy a house with a bigger payment. 
 
Warren was on CNBC this morning saying that the US stopped growing six weeks ago. He says that Europe is falling off a cliff of debt and they "may" be back in 10 years.

Corey Dutton · Answer

Bill Gulley - I agree with you that years of disaster can't be remedied overnight. This is why I think this "good news" is a bit premature, but maybe I'm wrong? Maybe it is really "over" as the article says.

I think business lending has to really open up to create jobs. Real estate has a lot to do with economics, but I agree with Bill that people just need to get back to work.

Bill Gulley · Answer

Look to the types of loans made, 5 and 7 year fixed that roll over to adjustable, those may not adjust until 2015, so it could be too that the upturn is simply the slowing of some loan product maturing. Then there is the LIBOR issue, who knows yet?

But certainly as people get back to work and have the ability to pay everything else will follow. My area was not hit very hard...considering, but we know what has happened in some places.

You can't expect years of a disater in the making to be solved overnight, IMO.