Mortgage Pulse for the Week of April 20, 2009
Yogi Berra said, “It’s not over ‘til it’s over,” but there’s a hint at least in recent housing numbers to suggest we’ll have a real bottom to the real estate market later this year.
It all comes down to supply and demand, with supply being the number of new and existing homes for sale and demand being the number of sales actually completed. Families are started even in a recession so housing units are continually being absorbed. Unfortunately the housing bubble created too many new housing units causing the market to collapse. The question this week is when will that collapse end, housing prices will firm, and existing homeowners can start to recover from their underwater mortgages? Based on housing inventory numbers from the National Association of Realtors we have another six months or so to go.
That’s how long it will take, at current building and sales levels for the inexorable population increase to absorb enough excess housing inventories to return us to historic norms. What even allows us to get back to those norms is the steep decline in builders of new homes, many of which are no longer in business.
The number of new and existing houses on the market historically is enough to last 3-4 months, which is to say at current sales rates without replacing any of those homes all would be sold in 3-4 months. But right now housing inventories stand at 9.7 months. With only a marginal influx of new homes the difference between 9.7 and 3.5 (6.2 months) is the best predictor of when the market will hit BOTTOM, after which prices will finally start to increase on a national basis.
Does this mean yu should wait six months to buy a house? NO! It means this is an ideal time to be shopping for a house because it is a buyer’s market. But the perfect house is hard to find. When you find yours, BUY IT!
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