Tony Rand

Where Is That Mythical Housing Bottom?

Great commentary and questions. After spending the last 23 years working in the housing and banking industries, I can think of three primary areas that need to see improvement before we begin to see the housing bottom. I'm sure there are more areas that could be applied, but these three stand out the most. First, there is the affordability index.

As an example, near the height of the housing bubble, home prices in Orange County, California were so high that less than 10% of households had a median income that would qualify them to achieve the dream of home ownership. Because of risk ignorance, easy credit was made available to people who did not truly qualify.

Second is consumer confidence. Third, as already mentioned, is unemployment. All three of these areas must first see improvement and then stability before we see the housing bottom.

As ArkansasAngie mentioned above, there are widespread fluctuations throughout the country where some areas are greatly impacted. Many areas, which can in part claim credit for instituting anti-predatory lending laws, have been protected from artificially inflated home prices and excessive consumer spending by using home equity like it had an ATM card attached to it.

Because the housing boom was artificially sustained outside of normal cyclical channels, the hangover from the party will last longer - and it will also be more difficult to hold back on the reigns as we slide further down the correction side of the hill.

Housing Bottom and Homebuilders: No Sign of Improvement

J.C. is correct. We're not yet out of the woods and these builders must be desperate or making an unsafe gamble. The only way to really answer this is to look at their land inventory - are they stuck with too much and forced to develop it and move it because it is costing more to have it just sit there?