Well I would add one nuance: the recession may have been the immediate cause, but it’s important to bear in mind that housing was very expensive at the start of that time. So the recession kicked off the decline in this case, but it’s very possible that a decline would have happened anyway (though maybe it would have been shallower or slower… no way of knowing really).
That said, housing is as expensive now as it was then (albeit against a currently much more favorable rate climate for now)… so I don’t know how much comfort that should give you.
Re this:
“won’t a under-supply market typically lead to higher price until supply balances out demand?”
Yes, it will tend to, but all we know is that it is currently undersupplied. That could change in the months ahead. So the market is currently at a level that is pressuring prices upward, but it won’t necessarily be that way X months hence. As one example, if we were to have a 2013 style spike in rates, that’s something that could immediately put a damper on demand. (Not predicting that per se, just giving an example). That’s why I say the timing thing is pretty unreliable.
The way I look at it is:
– months of inventory predicts price changes in the immediate future (couple months out, maybe)
– valuations predict long-term potential price appreciation (or lack thereof)
…and everything in between is a guess.
There’s probably more nuance to it than that, but I think it’s a pretty good summary.
