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Home prices have hit 10-year lows, falling 25% to 35% from the peak in 2006. But hope is in the air, as is often the case in springtime, and for some 'hope springs eternal' means a bottom in the housing market.
"Many, myself included, think we are at a bottom," said Lew Ranieri Monday. He is often considered the godfather of mortgage-backed securities.
Famed economist Karl Case, co-founder of the S&P/Case-Shiller Home Price Index told The Daily Ticker just as much at the end of April. "We're bouncing along a rocky bottom," he said, noting a recovery in housing prices had begun.
Fiserv, a housing forecaster, even expects home prices to increase 4% annually over the next five years. This rebound could start as soon as this summer.
The National Association of Realtors reported Wednesday that median prices for single-family homes rose in 74 of 146 metropolitan areas in the first quarter, compared to the same quarter in 2011. There were 2.37 million existing homes available for sale, a 20% drop from the first quarter of last year and 40% below the peak of 2007.
Despite this optimism, Radar Logic CEO Michael Feder, a housing expert who tracks daily spot prices in the residential real estate market, is "not buying" the hype.
"Of course there is a chance that that can happen, but I would personally be surprised if it does," says Feder. He argues that too much housing inventory and too much mortgage debt will keep prices low.
While new home construction has slowed, there are still currently seven million homes on the market that are either for sale, are vacant or waiting to be sold, says Feder. Moreover, there are roughly 11 million homeowners who suffer from underwater homes, meaning they owe more on their mortgages than the house is actually worth, he says. This has prevented families who are ready to upgrade to a bigger home from selling.
In his opinion, the best-case scenario is to keep bouncing along the bottom. The worst-case is for home prices to continue their decline.
Tell us what you think in the comments section below or on Facebook: Do you think the housing market hit bottom?
