Is the Low End of the Housing Market Finding a Bottom?

Apparently there is a "feeding frenzy" on homes in the lower-end of the market in Sonoma County.

This article in the Press Democrat reports that once a home is priced below $300,000 buyers are getting into bidding wars trying to secure their first place.

According to one local agent:

"They're coming out in droves because they know there's no waiting any longer for prices to bottom out. There's definitely more buyers than inventory. Anything under $300,000 -- it's gone," said Logan Adams, associate broker with Remax Central in Santa Rosa.

Remember this quote.

As I've shown, the markets expect prices to continue to fall.

And while it's true that a $300,000 is affordable to some with interest rates where they are at right NOW, it is my belief that mortgage rates will be heading up. Other than the government who is really going to buy a mortgage only yielding 5%? That's going to make housing less affordable and prices will continue to retreat.

Finally, take a look at the graph below from economists Carmen Reinhart (Univ. of Maryland) and Kenneth Rogoff (Harvard). Their research shows it takes an average of 6 years for housing prices to stop declining after a financial crisis. If history is any guide that would mean housing would bottom in 2012.


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