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How Long Will Renewed Downtrend in Housing Last?

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Looking at the housing market, there's nothing out there priced right or worth buying.

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Housing data is getting ugly again. Or rather, housing data has been getting ugly for months but has been pushed to the bottom of the headline queue by, frankly, more important things.

As the world learns to cope with ever more turbulence in the Middle East, the aftermath of the disaster(s) in Japan and rising commodity prices, economists and pundits alike are refocusing on housing.

The double dip, a renewed downtrend in home prices, is now in full swing. But how long will it last?

According to the S&P Case Shiller Home Price Index, a widely watched gauge of housing values, 11 metro markets have made new lows and prices have been slipping now for the past six months. And since Case Shiller is backwards looking (that is, the March report tallies data through January), the next few months should be uglier still.

So why does this depressing data conflict so directly with most buyers' experience in the marketplace? From San Rafael to San Jose, we hear the same complaint: There's nothing out there. Nothing, that is, that's priced right or worth buying. Despite bloated inventory on paper, in most areas there is little in the way of well-priced, good quality homes available for purchase.

Our proprietary sentiment indicators are flashing, telling us that the tide may be shifting and the downtrend may be coming to an end. Some agents are even going so far as to say we are entering a seller's market.

But before being accused of donning our Realtor pompoms, some words of caution. On June 30th, the Federal Reserve is winding down its most recent round of so-called Quantitative Easing, code for "printing money and keeping interest rates low." Some experts caution that interest rates may rise as we move towards that date, since external demand for US Treasuries is tepid, at best. Others offer a more sanguine prediction: If rates tick up materially, Fed Chairman Ben Bernanke will simply rev up the printing presses to keep them low.

Foreclosure rates remain high, but conditions appear to at least be getting worse at a slower pace. Still, loads of distressed properties loom in the shadows and will come to market in the coming months (and years), keeping a lid on material appreciation. Lending conditions are still tight, the economy continues to be fitful, and rising oil and food prices aren't doing the US consumer any favors.

All this adds up to a confusing real estate market, one which few agents fully understand.

Editor's Note: This originally published on Cirios Real Estate.


Lasting through April 15, 100% of the donations made to The Ruby Peck Foundation for Children's Education will be channeled to the children of Japan as they attempt to find their footing following this natural disaster; and to kick off this drive, we'll pledge $5000 to get it started. Please do what you can, as it will add up, and thanks.
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