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The End of the Housing Bust?

Posted by: Chris Palmeri on July 29, 2009

I’m reading with some glee all the national coverage of the end of the housing bust. “Home Prices Rise Across the U.S.” says the front page of the Wall Street Journal. “3-Year Descent in Home Prices Appears At End,” says the same spot in the New York Times. CNBC devoted an hour to the subject last night. Newsweek has called the recession over on its cover this week.
The numbers are cheery. New housing starts were up 3.6% in June. Existing home sales were up 3.6%. New home sales jumped 11%. Even Yale Professor Robert Shiller, who told Fortune just a couple of weeks ago that “prices will continue to fall for a while, but at a slower pace, and then stabilize,” is now more bullish. Fifteen of the twenty cities in his Case-Shiller Index saw a price improvement in May, after 34 months of declines. “The change in momentum here is very significant,” he says now.

I was criticized a month and a half ago when I wrote a blog headline that screamed Home Prices Have Hit Bottom. I’m not going to crow about that. If you were on the street, seeing what was happening, the multiple offers, the bids over asking price, the agents not returning your calls. Then you saw what the national numbers would soon report. I’m still hearing and reading about a second wave of foreclosures coming. “September 15,” one real estate agent told me matter-of-factly. There will be more homes coming on the market. More banks will take hits. More people will accept lower prices for their property. It’s still a good time to buy real estate and a lousy time to sell.

Reader Comments


July 29, 2009 8:25 PM

Housing won't really come back until all the foreclosures are sold off. If the economy continues to improve it might take until 2011 before housing is really back.

I have a theory about Americans and their houses...they LOVE them, almost to the same extent as their cars so housing will never take much of a back seat. Once housing bounces back expect it to continue it's climb..but only for certain areas: those good for raising families and growing old in.


July 29, 2009 9:42 PM

I don't think home prices have bottomed out just yet. Right now, there are all kinds of incentives being offered by builders for new homes, as well as previously unheard of concessions for existing stock. Those with cash and good credit can get some fantastic bargains in this market and they're taking advantage. Problem is, that particular niche can't hold the market up for long. The next wave of potential buyers are not so financially well endowed.
They're more likely to have far less cash and far worse credit ratings.
Banks are simply not making loans if you're any kind of credit risk. For this reason, that next group of would be home buyers will have to put off home ownership until they can accumulate more cash and repair damaged FICO scores.
I think home prices have only reached a plateau and will resume their fall by the end of summer.
I don't think they'll reach bottom until spring of 2010 at the earliest.

Gary Anderson

July 29, 2009 11:02 PM

Of course deflation in housing will still be with us. And the banks, by the way they are adding to their excess reserves, apparently know this:


July 30, 2009 12:11 AM

I think the author is overly optimistic. Personal income is still taking a hit and unemployment has not hit bottom. House prices will need to continue their decline as incomes continue to decline in order to maintain affordability. In addition, many loans were put on hold because of the financial meltdown and I think the recent numbers are more of a correction caused by the pending loans finally being funded. I know several people that finally got their loans approved after waiting several months. It remains to be seen if this is a trend or a one time correction.

bill brueckner

July 30, 2009 6:54 AM

How can we be at the bottom of the housing bust while people are still loosing jobs? One thing is for sure salaries have not hit bottom. Just like health care needs to be taken off the backs of corporations to make them competititve world wide so to wages must be lowered to for the same reason competitiveness in making profits.

"We shall have world government, whether or not we life it. The only question is whether World Government will be achieved by conquest or consent" Statement made before the United States Senate on Feb 7, 1950 by james paul warbury son of paul warburg whowrote the federal reserve act, and nephew mar warburg who had financed hitler

Over half a million jobs are lost each month.

Our economy has shown 66% of transactions are people to business transactions. Business to Business transactions and government to business transactions are never mention. Certainly the perpetual war that goes on drives the costs of the military industrial complex to new highs.

republicans and democrats pass illegal law that is directing us in this depression.

remember in november

mr dave

July 30, 2009 12:03 PM

Housing prices will be up and down for the next 12 months as more foreclosures happen and more people who have lost jobs out houses on the market that they can't afford now, driving down costs. Expect a rocky ride ahead for a while before you can open the wine and celebrate!

Kenneth G. Smith II

July 30, 2009 12:12 PM

Great news or just a seasonal factor coming to play? Residential sales activity is returning to the levels of the seasonal sales market. No one should be surprised that new homes sales have increased with the incentives of the $8,000 new home buyer program and interest rates below 5.5%.

But hold on, seasonal sales activity should be up. The peak months for sales will be June, July and August. So for the next several months we should continue to see a recovery in activity. The key benchmark for recovery is the median sales price, which is still down. Once the excess building supply and foreclosure activity (Housing In Crisis , Mortgage Assistance Program) abates, this number should correct itself to higher levels of $220,000 to $225,000. This will not occur until the summer selling season of 2010.

So yes, great news, but the real recovery is still a year off.


July 30, 2009 1:53 PM

Greed governs the housing market. Artificial inflation, like people in the Delmar area of San diego have kept the prices high by allowing only white people to move in. Eventually these whites are going bankrupt anyways and moving the SOuth Carolina. Peace in ones house is slowly eroding as the TV teaches all vices - the family spends some 4-5 hours sucking up all these and fighting with each other when they are done with watching TV. high schoolers are too busy having illegal sex with their friends. Parents are too busy working, some fornicating and some drinking in the bar.


July 30, 2009 6:24 PM

It is very difficult to get mortgages these days. Housing won't truly recover until mortgage companies become more accommodating.

July 30, 2009 8:04 PM

Many markets like NYC are still falling and have a long way to go. Unemployment is way too high for real estate to stabilize.


July 31, 2009 11:36 AM

People need to recognize the "end" of the housing bust just means the bottom, it does not mean the "recovery".

The recovery is likely a long way away. After 34 months of being unable to exhibit true stickiness, prices can now stick, sitting their, going neither up nor down til underlying fundamentals rise up to meet them - likely years and years away.

So for those of you wishing for a bottom (i.e. home prices stop falling nominally), congratulations, your day is here. However for those of you looking for (a) another leg down or (b) a recovery - sorry, you are both out of luck

Lisa Schofield

August 5, 2009 12:21 PM

As an Active realtor in the Phoenix Arizona market, I can tell you first hand that not everyone is jobless and not everyone is broke. There are many people with relatives helping them with their downpayment, many with cash and many with jobs. We do not hear about the positive ratios vs. the negative. There are multiple offers on houses all over the Phoenix Metro. ALL over! My clients are shocked that they have had to bid higher than list price! That they have to make 5 offers and cross their fingers that they get one! The difference this time when we say it is a buyers market is that the prices are lower, however the sellers are able to often times choose from many offers. The sellers are usually not making much if any money on the transaction. So is it a buyers or sellers market? It depends on the interpretation.

Tom Scheu

August 5, 2009 2:05 PM

Real Estate always has been local, meaning the market conditions could be very different based on location. In the Chicago area, July contracts were up 11% from July '08, but foreclosures were up 30% from the similar period. The outlook is still dismal unless you are a buyer, or a seller in a very demanded location where demand is greater than supply. Tight credit will mitigate demand, but the basic economic law of supply and demand is still dominant.


August 11, 2009 4:18 PM

I'm with Strategery. This author is overly optimistic. No one can make an assumption about the end of the housing bust until the number of foreclosures eases off. Industry professionals should at least be looking at more than just one index before jumping to conclusions. For the most timely and granular house price index in the industry check out:

Here's today's IAS360 release:


August 11, 2009- Integrated Asset Services®, LLC (IAS®) (, a leader in default management and residential collateral valuations, today released its IAS360 House Price Index (HPI). Based upon the timeliest and most granular data available in the industry, the index for national house prices moved ahead another 1.2% in June.

With June's gains--the fourth consecutive positive month--the U.S. housing benchmark advanced 2.7% for full second quarter 2009, virtually offsetting the 2.6% decline across the first three months of the year. The IAS360 HPI is still down 16.7% from its high in June 2007. Like May, all four U.S. census regions reported positive numbers for the month and in like order. For June, the Northeast was up 1.9%, the Midwest 1.8%, the South 1.2%, and the West 0.4%.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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