Timing the bottom is easy. You look for the leading indicators to reverse. The leading indicators in housing, as far as I know, is the rate of change in inventory (year over year), days on market, months of inventory, ratio of sales price/list price. You’ll need MLS access for this. When these change, you’ll know the bottom has passed. And you will be 3 months ahead of the general public, which is relying on dated information from Dataquick.
Dataquick is 3 months behind the market. We are just now getting data on January offers. January offers close in February – March, and are reported the following month, either March or April.
I plan on checking back to see what Rich’s data holds, too.
What could be different this time is the magnitude of change in the early years. More people will be forced into foreclosure, probably 10 million (see OfTwoMinds.com, and check his Housing Bubble and Financial Meltdown articles, this guy has all the data on the national scale). The bulk of foreclosures will come on-line in 2007. After that, the rate of decrease might slow down. If interest rates pick up to 8% or 9%, the mortgage interest deduction may balance out with the loss of equity as the market continues its decline.
We also should ask why we yearn for a house. Do you want something to fix up? Do you not like the paint? Do you want a bigger yard? I believe a rental house can offer all this. I am planning to do some painting this summer. I will do some myself, and hire out the rest. I’ll plant some flowers, too. I’m adding A/C, in cooperation with the landlord. A rental house is a home, too. To maximize financial gain, we have to expect a wait of 5-7 years.
