After looking at some recent and longer-term comprehensive statistics from the housing market, it appears that the worst is behind us and we can realistically hope for normalcy going forward. Why is that?
1) Prices have adjusted. As of 9/30/2009, the median price of a single family home (including condos) was down 21% from three years prior and down 10% from five years prior. Hmmm, and I thought Bernanke was very sure that housing prices would never fall nationwide! Over a ten year timeframe, the gain is a lackluster 26%. So I think we can safely say that prices have corrected.
2) Inventories for sale are much lower, down over 25% from the peak in July 2007. They are still unusually high, but builders have DRAMATICALLY cut back on building, and I wouldn't be shocked to hear of shortages of new homes for sale in the coming years.
3) Affordability is good. With mortgage rates extremely low and prices having fallen, affordability is better than it has been for generations. This is likely to deteriorate some as rates rise (whether that will be gradual or abrupt is unclear) over the coming months and years.
Posted November 5, 2009 by Nathan Gendelman
