Has the Housing Market Finally Hit Bottom?


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Interest rates are climbing again and economists are quick to credit an improving economy. That should send home prices rising again, after four years of heavy losses for U.S. homeowners, with some hard-hit areas like Arizona, Nevada, and Florida suffering home value declines of up to 50% in many cases.

But some economists aren’t so sure the U.S. home prices have hit rock bottom yet – but expect they soon will.

For instance, Zillow.com says that home prices will drop by a meager 0.7% in 2012, before rising on a year-to-year basis through 2016:

Zillow Chart on Home Prices Trends

What other factors can consumers use to evaluate whether home prices are at the bottom? Let’s examine a few barometers that can cast some clarity on the issue:

Foreclosures – U.S. home foreclosures have pretty much flattened out, and that’s a good indicator that home prices are finally off the floor. According to Corelogic, home foreclosures stood at 65,000 in February, 2012, down from 71,000 in January. Falling foreclosures means that the inventory of unsold homes is thinning out, which elevates home prices, especially in areas that were overburdened with foreclosed properties.

Sales of Investment and Vacation Homes – Sales of investment and vacation properties are a good indicator of the housing industry’s health. That’s because when sales of such properties are up, it might well mean consumers have a perception that real estate is picking up again, and will want to buy before prices go too high. The National Association of Realtors reports that’s exactly the case right now, with investment homes rising a whopping 64% in 2011, and vacation home sales up 7.7%. Compare those figures to owner-occupied homes, which were down 15.5% over the same time period.

Number of delinquent homeowners – U.S. homeowners behind on their mortgages are in moderate decline as well, according to the CoreLogic report. The number of U.S. mortgages 90-days or more delinquent stood at 7.3% in February, 2012. That’s down from 7.8% in February, 2011. As mortgage delinquencies decline, that usually means the overall economy is improving, more Americans are employed, and more mortgages are being paid on time. Economists frequently link delinquent mortgages to housing values. In this instance it’s good news for U.S. homeowners.

Also keep an eye on what’s happening on Wall Street. Homebuilding stocks are on the rise, as investors once again may be bullish on home-related stocks after a long dry spell.

Miami-based homebuilding giant Lennar, for example, says its first-quarter operating margins were the best since 2006. It’s stock has risen from $20 per share in January to $27 per share in early April. “We have seen the market stabilize, driven by a combination of low home prices and low mortgage rates, making the decision to purchase a new home more attractive, compared to the heated rental market,” Lennar CEO Stuart Miller said in a statement.

Nothing is ever etched in stone, especially something as volatile as home prices. But the relevant data suggests the housing market, after a rough few years, may soon be on the rise again. Be sure to check out the Credit Sesame mortgage payment calculator and mortgage comparison calculator.

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Published April 18, 2012 Updated: March 8, 2016
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