I’ve been following the markets very closely. Real estate (especially high end) has a long way to come down. We won’t see the true state of the market until the government takes out all their props.
Namely
1) New home buyer $8K credit (probably will be extended)
2) FED buying of 10 year government debt (over $400b). This is supposed to stop this month. They are responsible for about ½ of all purchases and have kept the 10 year rate artificially low (likewise mortgage rates). The yield has been rising steadily over the past week. Right now it’s at 3.4%, but it should be at around 4.5% and could rise from there until we have another stock market sell-off and rush for safety.
3) FED buying of mortgages (over $1t). Scheduled to stop by the 1st quarter of 2010.
4) FHA going bust. The government is currently providing financing for over 80% of new mortgages. The FHA has basically become the new sub-prime lender. No problems have actually been solved, things have just been pushed a little further into the future.
In the near term, I expect there to be some decent deals by distressed sellers as the realization hits that things are not going to get better any time soon. Although, ultimately I don’t see home prices turning around until 2012 at the earliest as that is when the bulk of Option-ARM recasts and alt-A resets will have occurred… of course, that is also the time when the baby-boomers will begin down-sizing in mass . Realistically, I don’t see houses being a good investment into the foreseeable future… as it should be!