As for where we are in the market, there are a lot of factors that dictate this. We are all watching for the next set of loans to reset and see how much impact it will continue to have. We have noticed that those people who contact the 1-800-HelpNow line are finding ways to avoid foreclosure. I just don't think that many people are aware of this free assistance being offered. But until wages adjust to reflect the rising cost of living, we will not see what people are calling a "normal" market. In reality, this is a normal market: real estate is cyclical, and we are just at one end of the cycle. The reason it hurts is because we got there so quickly. Nothing else kept up with it.
I don't think anyone can predict where the "bottom" will be. The presidential election will affect it. Foreign oil will affect it. Wages, interest rates, the stock market, the value of a dollar overseas... it all affects it. It is a global economy - we (the US) are not in total control. Having said all that, I am an optimist. I believe that there is always a path, it just takes a bit of effort to find it. Two years ago, the path was for people who probably shouldn't have ventured into homeownership. The path now is for first-time buyers and investors. Everyone will get a chance sooner or later.
And people recently have gotten more skittish due to the huge rise in gas prices, as well as other prices. In the D.C. area, commuting (time and distance) is a big issue. You can easily spend 2-3 hours a day commuting. And with gas very close to $4.00 for regular, and around $4.25 for premium, people are feeling it. They're also feeling the extra expense of groceries and other items.
Let's see...searching for the silver lining. Close in, prices holding steady. A slight increase in activity this spring. Oh, and here's another one: Some increased interest from buyers interested in how to buy a short sale or foreclosure. But, honestly, nothing to suggest that the bottom is behind us.
Hope that helps.
There are many more people who bought homes then there were qualified buyers. The number of qualified buyers i would argue has decreased considerably, and will continue to do so as long as distressed property can be had for a song. At some point there are simply not going to be enough buyers to absorb the blow of the market reset - and that's when things will get bad.
If various efforts to slow down the flood of distressed property are effective, this could help everyone dodge a bullet in allowing time for these properties to be absorbed. If not - who knows where the bottom really is?
I think the problem is the majority of the models out there that many people use as indicators are based around historical knowledge. The problem is the issue that we're facing today is not born of historically acceptable circumstances. We have never quite faced what's going on in the past - so to try to use a historical references to chart a course through uncharted waters is simply not responsible. Honestly - it is a part of the reason why we're in this mess in the first place, and why horrible loans that shouldn't have been worth the paper they were written on, were given the same weight as historically stable loans.
This also doesn't take into consideration trends that even novices like myself are seeing within local markets. A round of distressed property hits the market, that distressed property gets snatched up - but at the end of the day - you're back at square one, with the remaining new homes yet to be sold, and with a good chunk of your average run of the mill properties still on the market. This will throw those models and predictions off considerably.
Also doesn't take into consideration possible effects of proposed bailout programs, and some of the assistance programs some banks are starting to offer. This may slow the flood of foreclosures and shortsales coming to market, but the net result on the overall economy is yet to be seen. Perhaps people have the ability to stay in thier homes and avoid financial ruin - but in doing are on a budget as to curb any discretionary spending. This ultimately puts a depression on the local economy - that could ultimately have a net-negative impact on local economies overall - and may ultimately cause as many if not more problems then it solves.
I think if you step back and take a look at the bigger picture - what we're facing isn't just an issue of a correction that's confined to a single market place such as real-estate, but an overall economic reset of sorts. The mess a lot of folks got into purchasing homes they could not afford was really just one instance of a much larger problem of many people living well beyond thier means. The RE industry has taken a pretty bad beating as a result - but the effects can and will continue to be felt in other areas of the economy.
Until the rest of the ripple effect has died down, it is simply not possible to take the temp of any specific area of the economy, given the complex cause-and-effect relationships among different sectors.