Monday, May 09, 2011

Housing Bottom Coming In Our Lifetimes

The housing market has one again pulled its welcome mat out from under speculators, flippers, and those who thought they could play at landlording.  Home prices are still heading down.  Falling at 1% per month and 3% per quarter makes for a nice linear projection, but this blog isn't about intellectual laziness.  The failure of government intervention has ended housing's artificial bottom.  The pending end of the Fed's QE2 will soon drive up mortgage rates and push prices further down, at least until the Fed panics and launches QE3. 

No one can accurately call a bottom in U.S. home prices.  The only certainty is that prices will bottom someday.  Sellers would do well to lower their expectations immediately so this market can find its equilibrium.  Buyers would do well to wait.  Patience should bring remarkable bargains in foreclosure sales later in 2011. 

Full disclosure:  No position in IYR but awaiting an entry point around 10x dividends.  Seriously.