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The “Housing Bottom Dance” continues

Every since Robert Toll gave his famous “dancing on the bottom” comment about housing back in 2006, we’ve seen hundreds of articles with sunny predictions of green shoots and market bottoms.  You’d think the media would cease to print them, but bottom articles remain a staple of real estate reports.  Yesterday Reuters proclaimed Home prices close to bottoming, to rise in 2013.  They at least decided to sound somewhat dubious about it: [Thanks L!]

(Reuters) – The relentless decline in home prices is nearing an end and prices should rise for the first time in seven years in 2013, but a possible new wave of foreclosures could threaten the recovery, according a Reuters poll of economists.

Usually “bottom” articles bury potential caveats down near the bottom of the article, so I suppose reporters are learning something.  It’s interesting though that just a few days ago, Reuters was predicting that “possible new wave of foreclosures” to become a reality:

Housing experts say localized warning signs of a new wave of foreclosure are likely to be replicated across much of the United States.

Online foreclosure marketplace RealtyTrac estimated that while foreclosures dropped slightly nationwide in February from January and from February 2011, they rose in 21 states and jumped sharply in cities like Tampa (64 percent), Chicago (43 percent) and Miami (53 percent).

RealtyTrac CEO Brandon Moore said the “numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed.”

So basically they are saying “Housing prices are bottoming, unless foreclosures increase, which we expect to happen”.

I’m often accused of being a perma-bear.  I don’t really believe that I’m a perma-bear about housing.  I believe that eventually the market is bound to stabilize.  I am, however, a perma-bear on the American government’s housing policies.  Foolish policies set the stage for the housing bubble and collapse, and foolish policies continue to extend the pain.  In the meantime, it looks like Bob Toll we need to just keep on dancing.


Published inBlog PostsFinanceU.S. Markets


  1. Metroplexual Metroplexual


    I think the non-judicial foreclosure states are just about done in going down in price. It is just the vibe I’m getting. My house is going down in price on Trulia and Zillow but that is because of my purchase as well as someone else in the neighborhood lowballing.

  2. Bob Carpenter Bob Carpenter

    This is how to figure the bottom. Take the average income in your area. Multiply it by 3 and you’ll come out with an affordable and stable average price. So if your city’s average income is $50k, the average house should sell for no more than $150,000. Thats how mortgages have been calculated for the past 100 years. Its only in the last 10 years and subprime that prices have gone on to 5 or 6 times income which is unaffordable for most people.

  3. You are 100% correct in your statement that continued foolish government housing policies will guarantee ongoing problems for housing. Right now over 95% of mortgage loans are owned, guaranteed or insured by the US Government and at the same time the US Government is keeping rates at around 4%, which is not normal. Fake or phony is the best way to describe the current housing market. All these “housing has bottomed” articles always seem to point out sales and inventory, but never that the entire foundation of the housing market is fake and could disappear at any time. Over time the only thing that pushes home prices up in a sustainable manner is jobs and income. Right now, unemployment is terribly high and there is no personal income growth. Making matters worse, according to MIT real inflation is running at 8%, which is hammering peoples’ wallets and reducing the amount of money that people can spend on housing and everything else. Given that incomes are not likely to rise anytime soon and foreclosures remain extremely high there is simply no sustainable way that housing prices can rise right now. Therefore, my conclusion is that any rise in home prices is due to the phone baloney government mortgage financing market, which will do what – burst. We truly have a market of bubbles.

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