Housing Market I

I’m still doing a lot of reading about the housing market, which i think has been fascinating to watch over the last few years. Unfortunately for many it seems that the rapid price rises of the past four years reflect - again - a bubble mentality whose consequence seemingly await us shortly.

My latest opinion is that the spring selling season will start off much, much slower in april and inventories will continue to accumulate. Interest rates will probably top out at around 5.25% in March but by then interest rates on the 10 year Tbill will have to have risen much higher, resulting in a smaller monthly mortgage payment. Questionable lending practices might start to fall apart, especially at Fannie Mae who has been more than happy to take anyone’s over-priced property.

I see prices trending downwards from April forward for a April06-April07 10-15% loss, essentially retracing the last year of increases. After that the future is obviously very fuzzy, but I would expect real prices(ie inflation adjusted) to drift lower over the next 2-3 years, probably resulting in a 5 year loss of 20% in real prices.

More later.

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