Reader Krazy Kat sometimes sends me links to articles on this blog, CalculatedRisk.com, and they’re always interesting. Here’s one explaining why there are two bottoms in housing declines: housing starts and new homes and then later, sometimes a couple of years later, existing housing prices. Obviously, homeowners will be more affected by the latter. Is the author right? Heck if I know but he or she seems to know a lot more than I do, so why not? I’m just guessing anyway. Scroll up (or down – it’s a great blog) for more good stuff on the real estate market, mortgages, etc. Here’s what the author has to say about two bottoms:
In my previous post I discussed the question: Housing Starts: Is this the bottom?
We don’t know the answer yet.
But some readers are confusing a bottom in housing starts with a bottom in pricing.It doesn’t work that way!
There will be two distinct bottoms for housing:
1) First single-family housing starts and new home sales will bottom.
and then followed some time later …
2) Prices for existing homes will bottom.
Just about every housing bust follows this pattern. The bottom in prices could be a year, or two, or more away. It is way too early to try to call the bottom in prices. House prices will almost certainly fall all year and probably next year too. Prices will continue to fall. Prices are not at the bottom.
Sorry for repeating myself.
Also, it is theoretically possible that single-family housing starts (off 80% from peak) and new home sales (off 78% from peak) could go to zero – but unlikely. Sometime this year housing starts and new home sales will probably bottom, but that doesn’t indicate a bottom for house prices.