Thursday, April 23, 2009

Is the Real Estate Market Turning?

Last night, I had a discussion with an investor who believed the real estate market was years from turning. His belief was that potential home buyers were to shell shocked to buy.

My argument was that the Fed has printed so much money that it will also find its way into the real estate market. Further, while there may be some shell shocked by their losing housing investments, somehow part of the American dream still consists of owning your own home. And, my last point was that this isn't your grandfather's Great Depression.  News travels much faster, and perceptions change much faster because of the hundreds of news outlets, and of course the internet.

Which brings me to this James Hagerty WSJ story:
Falling home prices are starting to ignite bidding wars in a few parts of the U.S. as first-time buyers compete with investors for the same foreclosed properties.

In most of the nation, the supply of unsold homes continues to swamp demand. Home prices in many markets continue to fall, and foreclosures, which slowed in late 2008 as mortgage companies delayed taking action against delinquent borrowers, are picking up again.

But real-estate brokers say multiple offers on certain homes have recently become more common in parts of California and Arizona and the Washington, D.C., and Minneapolis-St. Paul metropolitan areas...

The Wall Street Journal's quarterly survey of 28 major metro areas shows that there is still a glut of homes available in most markets. But the glut has shrunk, and some areas are running into shortages of moderately priced homes in middle-class neighborhoods
Bottom line: Allow prices to fall, and markets will clear. Start pumping billions of new money into the system and prices will began to rise. The market is turning.

1 comment:

  1. I agree with you, but... As the WSJ article suggests, we are finding a bottom in some areas. Based on the housing supply being 9.8 months, we still have quite a way to go before the market bottoms. It will bottom when you see supply down to a historical norm of 4 to 6 months supply. I see prices continuing to decline until supply is normal. The "but" is, that I think people are spooked by the market crash. What we saw before is a bubble and I don't think people will be fooled again so quickly. Up to 24% of purchases were by speculators. My guess is that people will buy homes for residential purposes, not investment purposes and the market will not soar. My other guess is that when the new money hits the economy, it will find another asset class. Don't know what it will be. Green technology? I'm worried about the commercial real estate market now. It will lead to more deflation.