When are home values going to reach bottom?

First, the bad news: After six years of declining real estate prices, the market appears to have hit bottom. The good news: Values are no longer declining, helping both sellers and buyers. While not as wonderful as a strong, hot economic recovery, reaching the bottom is necessary before upward trends take hold.

Until the rest of the economy rebounds, the real estate market may need to sit on the bottom for a while. Reaching the market floor is the first step, but it is encouraging. From a “glass half-full” perspective, reaching market bottom typically results in a “bounce” up along the way.

New home construction has been steadily declining, particularly in the last four years. The culmination of this downward trend occurred in 2011, when only 434,000 single family homes were built. This is the fewest homes built since records have been kept. Zelman & Associates, a respected research firm, estimates that home builders will construct around 540,000 new homes in 2012. This is an encouraging 24 percent increase over last year.

With foreclosures and short sales still common, housing experts still worry about the potential detrimental effects of the “shadow inventory” of distressed homes for sale. Since this inventory is finally in decline, it may not kill a real estate recovery. However, it could force home values to sit on the bottom for up to several years.

Buyers who have been awaiting home prices to reach bottom, should rejoice–and act! This should avoid the heartbreak of those who historically wait for mortgage rates to hit bottom before refinancing. In most cases, unless they are very lucky homeowners, the interest rate rebounds before they move to refinance.

Those who have been waiting for the “best deal” to buy their next (or first) home should spring into action now. As everyone should know, economists and experts cannot predict the future. They can only offer experienced best guesses. Errors consistently occur, which is natural. Buyers should take advantage of the current situation before a bounce.

Sellers can also take heart. While there are few windfall profits available, home prices are stabilizing. Sellers no longer have to “give away” their homes or agree to cut already-discounted selling prices.

The market may be at the bottom, but, at least, it is stabilizing. How do you feel about this apparent stabilization of the real estate market? Are you encouraged? Or are you still fearful about the lack of a recovery?

7 years ago by in Home Values | You can follow any responses to this entry through the RSS feed. You can leave a response, or trackback from your own site.
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