It depends on when you think the market will turn. Most people on this site don’t think that can happen before 2010 at the earliest. The second wave of ARM resets doesn’t come back to down to the early-2007 level until the end of 2010 or so.
That second wave isn’t quite as big as the first wave but it includes a higher percentage of the most toxic neg-am loans. Coming after the market has already been hammered by the first wave, I’m of the opinion that the fallout of the second wave could be worse than that of the first wave. Worse, as in causing further declines. I think that there will be buyers who will look at the levelling off of foreclosure activity in 2009 as the sign they’ve been waiting for, thereby causing a rally. Maybe even some increases in pricing. Or maybe not.
What happens in 2009 depends on how much attention is given to the ARM/Foreclosure/Supply/Sales Volume ralationships by the media. If people largely come to understand that it will be a 2-round bout and that these elements basically can’t stabilize until after Round 2 is over there might not be much of a rally inbetween rounds.
No matter what, we will have to burn off the oversupply of listings before the pricing can stabilize. It makes no difference whether that relationship settles as a result of sellers backing out of the market or by must-sell sellers being succesful in unloading their baggage.
