The Wall Street Journal and The New York Times both published articles within the past six weeks declaring that the housing market has bottomed out. But hold on for just a minute. It seems that not everyone believes it.
Even Yale University professor Robert Shiller, co-founder of the S&P/Case-Shiller Home Price Indices, admits to being a bit skeptical. In fact, he told Fox Business News last week that he is not entirely convinced that a bottom has been reached yet.
“It’s possible, but I’m not confident. This is partly seasonal,” Shiller said regarding the recent rise in home prices that have been documented over the past few months.
Only one thing is certain when it comes to economics: there is no certainty as to when an economic cycle has bottomed out until it’s already past. In real estate, one of the biggest driving forces behind our national economy, this is especially true.
Everybody wants to be the one who can “time” the bottom of the market so they can say that they saw it coming, and they were smart enough to buy at the bottom of the market.
The problem is — and always has been — that real estate is a lagging indicator so by the time the bottom has been officially declared, all those bottom feeders have already missed it. Too bad! But you can still get a bargain in real estate even after the market starts on its way back up through buying short sales and bank-owned properties (REOs).
An economist by trade, Shiller’s skepticism is founded on a variety of factors, particularly the “large overhang of homes that are either in foreclosure or near it,” the Wall Street Journal noted in an article published today. “If those homes flooded the market, it could push prices down even further.”
Although there is a case to be made for optimism because momentum seems to be leaning in favor of increasing home prices, high unemployment nationally is another reason Shiller is not entirely sold on the idea yet.
He does see a handful of markets showing signs of possible market bubbles (San Francisco and Phoenix in particular because of the speculative mindset of those who have been buying in those markets). Chicago and Atlanta as well, due to a suggested decline in recent foreclosure activity.
Momentum may be the most determining factor when it comes to the real estate market’s eventual recovery, but until Shiller sees further sustainability — at least through the fall and next spring — he is not ready to jump on the bandwagon.
Personally, I agree with Dr. Shiller. I want more substantive, verifiable evidence before I take anyone’s word that prices have finally bottomed out. What do you think? Is the country primed for a recovery now? Or is this just so much public relations hype to try and get buyers off the fence?
Let us know what you think.