1. It is quite possible to be near the bottom despite high REO and default numbers. Just look at 1996. Housing bailout has the potential to stop the influx of new REOs into hardest-hit areas.
2. Option ARMs will reset, and it will create downward pressure on prices in desirable areas. This downward pressure will be met by resistance every step of the way, because desirable areas (25% of all zip codes in the state) contain 75% of good public schools. Every $10,000 median price reduction will bring throngs of buyers out of the woods. Many desirable areas have reasonable mortgage to rent ratios, not much higher than they were in 2001-2002 before the bubble. Relatively few option-ARM’ed places have the potential to crash more than 25%. (Santaluz comes to mind) There aren’t many option ARMs outside desirable areas.
3. I fail to see the point of this section.
4. Recessions end. This particular jump in unemployment is isolated to a few sectors. There’s no evidence of recession in high tech.
5. There’s no argument against the bottom here.
6. Median household income has no relation to the median house price. To see why, imagine an island with 100 households, 90 rental apartments, and 10 houses.
Also, the author apparently assumes than 28% housing to income ratio is in effect. In reality, you can get almost any government-backed loan with PITI as high as 45% of gross income.
7. People rent because there are too many apartment complexes and rental units. House prices and rental rates adjust to make sure that almost all rentals are filled and almost all houses are owned by someone. In a normal situation, poorer people rent and richer people own.
8. Demographic change is a slow mechanism and it has no effect on whether we’re close to the bottom or years away from one.
9. This is simply an expanded version of #4.
10. Most people don’t buy houses to live there for a year and then flip. A potential buyer does not care how much his house is going to be worth in 12 months. He looks at the bigger picture, 5 years or longer. In many parts of the state, he sees that he can buy a house and it would cost him as much, or less, to own (interest + tax + insurance + downpayment interest loss – federal & state tax savings), than to rent an identical house. Furthermore, his interest payments would be lower and lower year after year as he pays off the mortgage, but his rent would be higher and higher. This can be a strong argument in favor of buying.
