"Home prices are becoming affordable again, so the decline in prices is likely more than half over," say Dr. Marvin Appel and Gerald Appel of Systems & Forecasts.
Meanwhile, the technical experts believe that long-term investors can now look to get back into the real estate investment market and recommend two ETFs that are based on rental REITs.
"Many analysts do not expect the financial markets to improve significantly until home prices stop falling. The pace of existing home sales remains low, and available inventory relatively high, both indicating that buyers are not yet able to step into the market at current prices.
"However, that could change within a year. Home prices are becoming affordable again, so the decline in prices is likely more than half over.
"The median home price is now more affordable to the median household than at any time since the start of 2004. My analysis suggests that housing prices will have to fall a bit more, but the housing market is not far from being reasonably valued for the first time in five years.
"Meanwhile, rental costs have remained stable, and apparently have not had any effect on housing prices independent of household income. Historically, there have been wide swings in the ability of the median household to afford an average house.
"In contrast, the cost of renting a primary residence has tracked the growth in median household income very closely. There have been good times and bad times to buy a house, but it has not mattered that much when you decide to rent. Apartment REIT prices and home prices have followed the same long-term trend since 1994.
"The price appreciation in a hypothetical REIT portfolio has followed the same long-term trajectory as house prices have during the past fourteen years -- although REITs have been far more volatile from month-to-month and have had corrections (1997-1999 and 2002) that housing prices did not experience.
"Apartment REITs are actually positive for 2008. That is consistent with the notion that housing prices are near their lows.
"The implication of this is that real estate investors should look to get back in for long-term holdings. You can be patient about waiting for good prices, however, since REITs have recently exhibited a high degree of short term volatility. As with any long-term equity investment, downdraft risk is significant -- at least 10% to 20%.
"Recommended REIT exchange traded funds to buy on market dips include the iShares Cohen & Steers Realty Majors ETF (NYSE: ICF), which yields 4.5% at $73 a share or below; and the iShares FTSE Nareit Residential REIT Index ETF (NYSE: REZ) which yields 4.7% and which can be bought at $388 a share or below."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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