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Housing Free Fall

(The "doom and gloom" reports have become famous over the past year as newspapers and newscasts have been throwing daggers into the hearts of prospective sellers.)

What has been just as interesting is the numerous articles that come out about once every few days in the local newspaper that contradict the "doom and gloom" reports by stating the United states housing market is not crashing or falling and will return to normal soon. Well how soon is soon?

These positive market reports have been going on for over sixth months now. Are they just pumping false faith into the desperate seller?

"Another Housing Stumble" posted November 17, 2006 on capitalspectator.com, explains how despite the miscellaneous positive reports the U.S. housing market, or more accurately the seller's market, may see a lot more clouds before the sun finally appears.

"Earlier this month, former Fed Chairman Alan Greenspan dispensed some widely reported optimism by opining that 'the worst is behind us' in the housing correction of late."

This report of course was released less than two weeks after the Census Bureau reported today that U.S. housing starts fell 14.6 percent in October, which is the largest month-to-month decline since May 2005. But good thing the worst is behind us.

"Housing starts, of course, are but one of several metrics documenting trends in real estate. But until and if the data starts supporting Greenspan's prediction, prudence suggests adopting the philosophy of 'Look out below.'"

So how far should we expect to look down?

The market seems to get worse and worse like the infamous car ride to wherever when you are an innocent kid asking, "Are we there yet? Are we there yet?" Greenspan would simply reply, "In just a minute."

But Greenspan has some support. "Yes, the housing recession is 'steep,' Ed Yardeni, chief investment strategist at Oak Associates admits. But like Greenspan, he believes that it 'may be over sooner rather than later.' In support, he cites the recent rise in an index of builder confidence for sales of new single-family homes, which is published by The National Association of Homebuilders."

Confidence stemming from optimism is what has been keeping the market from experiencing a frenzy of panic. While this current correction is not really so bad, considering how drastic the boom was in terms of inflated prices and increased sales, it has been a lot worse than expected. "The next big stress test for optimism comes at the end of this month, when a fresh batch of economic data is updated, including existing and new home sales and the all-important personal income and spending series. In the meantime, there's plenty of opportunity to speculate. Definitive conclusions about 2007, however, remain on hold."

And if the current trends continue through all of 2007, that confidence and optimism will wane and the "It's almost over" excuse will need statistical support.

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