We've been bombarded by the news; housing inventory glut, price reductions, foreclosures, mortgage crunch, sub-prime lending woes. Some areas are worse than others. As with any real estate cycle, they have their peaks and valleys. This downward trend took it's roots in 2005, moving from one of the strongest seller's markets in history into a strong buyer's market for most areas. Interestingly enough, not all areas. There always seem to be a few areas that do well despite the existing market woes, (some parts of the Berkeley Hills, Albany, Kensington and the El cerrito Hills for example in the San Francisco East Bay Area). It always comes down to numbers, supply and demand.

Have prices hit bottom, or do they have further to go? How long will the housing recession last?

These real estate cycles typically last from two to five years. Most forcasters are pointing towards this winter to be the valley or low point of this down cycle with some relief coming sometime in 2008 or as late as 2009 depending on which source you listen to.

Lawrence Yun, NAR senior economist, said he isn’t looking for any notable changes in sales activity. "Mortgage disruptions will hold back sales over the short term, but long-term fundamentals are favorable. A modest upturn is projected for existing-home sales toward the end of the year, with broader improvement to include the new-home market by the middle of 2008."

"More buyers, and cutbacks in new construction, will eventually draw down the inventory levels and support future price appreciation, but general gains will be modest next year. Serious buyers today have a long-term view of housing as an investment – speculators have left the market."

View the U S Economic Outlook - August, 2007, from NAR, HERE.

"This isn't going to get better until this unsold inventory gets absorbed," said Standard Pacific's Delva, "And this isn't going to happen until the financing issues are resolved; the smart money has the slump ending in the latter half of next year or some time in 2009." Story by Robert Hollis, San Francisco Chronicle. View the full story Here.

Delva and other builders say a key turning point will be when potential buyers return to the market, convinced that the value of what they're buying won't continue to decline.

When that happens, "There's going to be a slew of buyers coming out of the woodwork," said KB Home's Burnstein.

Will this winter be one of the best buying opportunities that we've seen in years?

Interest rates, although much harder to obtain, are still at their lowest levels in decades. Rates on 30 year mortgages sank last week to their lowest point in two months, a dose of good news for people thinking about buying a home. "30-year rates lowest since the end of May.

"As of last week, the market for conforming mortgages was still operating smoothly, and if you qualify for one, you shouldn't have trouble getting a mortgage at a reasonable price." - Kathleen Pender also of the Chronicle.

So far, borrowers with decent credit histories and the ability to document their income - "the majority of the home-buying public" - aren't being shut out from getting a loan. - CNN, "Six Questions Consumers Are Asking About The Mortgage Market," By Amy Hoak

"Sellers can no longer be reluctant to accept offers or reduce prices. Tightening credit and diminishing mortgage products will continue to reduce the pool of qualified buyers. This, along with the increase in national housing inventories, means now is not the time to hold out for the best price possible." - Alexandra Saunders, BGS Financial.

The median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950.

Should I wait or buy now?

Alexandra goes onto say; "Potential borrowers cannot wait any longer. For those who are considering buying a home, be aware that the volatile credit market can change overnight, leaving fewer options available to borrowers attempting to qualify for a mortgage. With decreases in home values and fewer available mortgage instruments, delaying any longer could get significantly more expensive."

This isn't fully realized until you weigh in the effect of waiting for prices to drop while interest rates continue to increase. So, you have to ask yourself, in the coming months, do I expect interest rates to increase? If so, how much more must home prices drop to counter the effect of rising interest rates?

The buying season typically slows after the summer months with a drammatic drop-off by mid October. With so much inventory and uncertainty in the mortgage & real estate markets, there should be plenty of "bargains" this winter.

"The key theme is that while it may be a different mortgage landscape, it still can be a good market in which to buy - as long as people are buying for the right reasons and are paired with loans that ensure they will be able to keep the home in the future." - CNN

Labels: Bay Area Real Estate, CNN, Housing Inventory, Housing Market, Interest Rate, Real Estate Cycles, San Francisco Chronicle