Why Only a Fool Would Call this a Bottom in the Real Estate Market

National Association of Realtors last week reported existing home sales had increased for the fourth month in a row. Existing homes, or homes that are previously owned, were up 7.2% to an annualized rat of   5.25 million compared with June and 5% from July 2008.

While many are standing on their soap boxes preaching the end of the crisis as we know it there is strong evidence that we are not out of the woods yet. While yes prices are down, mortgage rates are historically low and strong government incentives; these are exactly the issues in the marketplace.

* Prices are still down 32% from their peak and have not turned
* 30% of home sales in July were First Time Home Buyers
* 31% of home sales were distressed sales or sales of homes in foreclosure (First time in history)

Look at it; we still have huge amounts of “known” inventory on the market. We have government intervention that is artificially reducing this inventory through first time home buyer incentives, loan modifications, short sales and BILLIONS being spent weekly to keep mortgage rates low. You have lenders suspected of withholding foreclosed inventory off the market, by some accounts only about a third of repossessed houses are being actively marketed. Many home sellers above $250,000 taking their unsold home off the market and we may have another round of foreclosures due to “Alt-A” and option arm mortgages that will begin resetting and unemployment levels and underwriting guidelines are still tightening.

While sales of homes to first time home buyers has been a huge drag on home prices I don’t think we can conclude a turn around until prices collectively, actually start to increase, government intervention stops and monthly inventories are reduced.

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