If We Are At A Housing Bottom? Will We See A Sharp Increase In Prices Off The Bottom

I am a full time real estate agent for clients for the San Luis Obispo real estate market. As many of my loyal readers know, I have been a market timer in several markets,  first the stock market and later in the housing market.  You can play the "bubble markets" to your advantage by selling or shorting at the top.  I recall a conversation with a wealthy investor and real estate developer friend in 2005.  He informed me that he went to a real estate financial adviser who specialized in projections of what the future would be so his clients could plan real estate developments.  The developer said the adviser prognosticated that he should stop building and finish all his projects by January 2006.  The adviser wisely advised the developer to sell everything, including land, by January 2006!  At the time I asked my developer friend if he was going to follow his advise.  My friend replied, "No I don't believe it!  Besides what else can I do?".  I told my friend I agreed with his advisor, and I was going to follow his advise.    My friend started a couple new housing developments which went bust. 

A client asked me the question that if this is the bottom of the housing market will we see a sharp increase if prices in the near future.  I responded that in my opinion based on my observations of the past the housing market usually goes into a bottoming process at the bottom.  If you look at a graph of past housing booms and busts this "plateau period" can be anywhere from 9-12 months. This time the plateau period may be longer because of the high number of jobless! But jobs will be back and bent up demand for housing is there.  I see it at my web site www.myslohomefinder.com  We have seen a 50% increase in buyer interest for housing.  Besides we live in a beautiful place here, and San Luis Obispo real estate is always in demand. Then you see a gradual increase in prices for the first 2 year period, which eventually leads to increases above the rate of inflation.  I compare the move to a "wave motion".

The bellow chart shows the time period from the decrease in housing development to the upturn in prices.  The average time period is 5 years.  It you add 5 years to the date of real estate slow down in residential investments in 2006-2007  you come up with this year 2012.  (Thank you to calculatedriskblog.com for this great chart).