I just came across a very interesing Wall Street Journal opinion column titled as much: "The Housing Crisis Is Over," stating that April 2008 may have been the "bottom" of housing crash that started in late 2005. A pretty wild healine indeed, yet if you take the time to read it I think you will see that this guy's opinion is largely based on fundamentals, not just the wishful thinking of another housing crash victim.

Let's just say that he is right.....prices should start coming back, right? Not so, says the writer: "For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won't happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor."

His logic is based on the following key points:

  • The current housing bust is nearly three years old (no longer a new thing)
  • New home sales are down a staggering 63% from peak levels of 1.4 million & ousing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.
  • Residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever.
  • The very same thing that caused the bust will bring it back to life: Affordability. 

"Mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in."

I see some major logic in this guy's argument, and he certainly supports my personal theories that even if sales do increase, values will take a LONG time to recover. (See http://www.gostgeorge.com/blog_post.asp?post=14411)

By posting this I don't for a second imply that I agree with this opinion, but it makes for great conversation. What do you think? Somebody give me their take on this thing!