In one of the least enlightening stories you'll ever see, The Wall Street Journal's normally insightful "Ahead of the Tape" column reports (subscription required) that "A full recovery for housing, and maybe the broader economy, depends on a third step: Prices must stop falling. On that front, as with other economic data, the "second derivative" is improving -- things are still getting worse, but at a slower rate."
That's right: In order for the real estate market to be good again, real estate prices have to stop crashing. In a related story, The Washington Nationals will need to start winning baseball games if they are to have a shot at playing in the post-season.
The point the Journal is trying to make is that the signs of a real estate recovery so far have come in the form of increased sales volume in many of the most troubled markets, even as prices continue to tank. The hope is that increased volume will reduce the amount of inventory on the market -- it already has to some extent -- and that in turn will lead to stabilizing and eventually higher sales prices.
The problem is that the flailing economy that started with the real estate market is expected to hand housing more bad news. The New York Times reports that "With many economists anticipating that the unemployment rate will rise into the double digits from its current 8.9 percent, foreclosures are expected to accelerate."
Like a hamster on a wheel, the housing market will have to sell homes faster than banks repossess them in order to turn itself around. Eventually the pace of foreclosures will slow and sales will catch up and the housing market will return to a more balanced position. When will that happen? I have no idea, and I think that anyone who says they do know is lying.
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Reader Comments (Page 1 of 1)
5-26-2009 @ 10:27AM
Mike O said...
Several houses in my neighborhood, which had been sitting vacant for almost a year, just sold within the last two weeks. That's a good sign...
5-26-2009 @ 3:01PM
ij70 said...
What do you mean stop crashing? If they stop then I will not be able to afford one. I wan the prices to go lower so that I can buy a house.
5-26-2009 @ 3:45PM
ben said...
holy crap, that is so insightful. here's another one.
In order to stop the fire, the fire has to stop burning.
6-16-2009 @ 11:54AM
AccuriZ said...
A full recovery will not occur until the surplus housing crisis abates and this most likely will not occur until 2011 or 2012. With over 3 million excess housing units it will take no less than three years for the natural cycle of population growth to absorb these excess units. By analyzing the actual data, not estimates one can evaluate market conditions in a more objective manner.