Housing Market: Seeking The Bottom

In the Sunday Chicago Tribune, there was an interesting article “Still Looking for the Housing Market Bottom,” which cited Mark Zandi, Chief Economist For Moody’sEconomy.com and the author of “Financial Shock.” Mr. Zandi stated that the forecast of a housing market bottom is coming into view, and it occurs in several stages.

First stage in calling a bottom is seeing greater stability in housing demand. Since last year, new and existing home sales have stabilized, not having gone up or down. About half of the existing sales are distressed foreclosures or short sales. In addition, builders have regained control of their inventory.

Second stage in calling a bottom, prices stop declining. While Mr. Zandi sees another 5-10% decline (about 40% below the high), it could take until next spring. He also expects a substantial decline in the summer with a “sure” in “foreclose,” as well.

And even though home affordability is at the low end of the average presently, if the recent rise in fixed-rate mortgages to above 5.25% remains for awhile, the risk to the recovery to the housing markets broadens.

While we remain concerned for the housing markets in general and specifically the expanded potential for losses to financial entities such as Citigroup (C), Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and US Bancorp (USB).

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