The Housing Crisis is Over (sort of)

The grusome headlines coming fast and furious in the press and on TV suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the market is bottoming right now! How can this be? All the subprime problems, foreclosures, short sales, and so forth seem to be getting worse. Well, I don’t think we are going to return to the boom of 2005 anytime soon; maybe another 15 years. The facts are pretty clear, though. The trends are no longer getting worse. Remember, home sales peaked in 2005. New home sales are down 63% since then. Housing starts are off by 50%. So what’s going to stop the decline? The same thing that caused the bust; affordability. Buyers can afford homes again; price wise and loan wise. In real terms, the median price is now at a point where it only takes about 30% of monthly income to afford a home, compared to the high point of nearly 60%. Buyers are buying again! Orange County demand is beginning to grow again, and that’s a cheerful sign.