We Are Nowhere Near The Bottom

The Benchmark mortgage blog posted a blog post today asking the following question “Did we just see the first two sign of a housing recovery?” They base this on recent numbers from December showing increased sales and dropping inventory.

I tried to leave a comment but was unable so I will post my comment on my blog.

In my opinion, you are missing two important factors that will indicate a housing recovery. First, the economy is shedding 500,000 jobs a month which could equal 10% unemployment mid this year. With so many people losing their jobs and wages falling, there are less homebuyers on the market. This will help push inventory higher not lower.

Second, there is a massive reset of “pick payment” and “ALT-A loans” sent to re-adjust starting Q1 2009. This reset will make the subprime debacle look like child’s play.

This new wave of re-sets will lead to a massive new number of short sales and foreclosures. Dumping millions of more homes on to the market and increasing inventory to the highest levels we’ve seen in modern history. In this scenario supply will far exceed demand.

We are nowhere near the bottom of the housing market. The true indicator of a housing recovery is not inventory but jobs. Once we see two or three quarters of strong drop job growth then we can start to talk about a recovery. Just my two cents.

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