A client wrote me yesterday that he had just returned from a meeting of economists last week and was disturbed by their predictions.  They had made a rather convincing argument that we will not see the bottoming out of this debacle until approximately 18 months after foreclosures peak.  Since they have not peaked yet, then we could be looking into the "abyss" for the next 24 months. 

The North Shore communities of Winnetka, Wilmette, Kenilworth, Glencoe and Evanston have certainly seen drops in prices and sometimes a vast disconnect between list price and final sale price.  A quick MLS search for closed sales for the past 3 months showed that 163 single family homes sold in the above villages (as an aside, 206 homes sold in the same time period in 2007.)  The average closed sale to list price ratio was 86%.  In just the recent past, that ratio was closer to 95%.  But even 86% is looking better than some parts of Chicagoland where I have heard the number 60%!

Regarding the economists - I think they are used to making predictions because it's the nature of what they do.  I really don't make projections, I can only tell you my "gut" feeling from what I've been seeing.  At our weekly Monday morning meetings, we all discuss what we are thinking of the market and lately it has been somewhat down.  Lots of listings and a definitive lack of buyers.  Anybody who bought in the last year will likely lose money if they sold now.

For a dedicated buyer, this is a great time to buy a home.  But if you have to sell, well, that could be trouble.  If you buy low, you will probably have to sell low as well.  The biggest stumbling block in the market now is that buyers don't feel confident that they can sell their own homes to purchase a new one, so they don't do anything.  It's like a badly clogged drain.  For about 6 months, I have felt that buyers don't have the confidence to move forward and most don't understand what the government is trying to do.  Whether or not the bailout/buyout works, I think consumers just want something to be done.

But, really, what's the difference between buy high/sell high and buy low/sell low financially?  It only really affects you negatively if you must sell now and can't buy.  You would be in really great shape if you only were buying and not selling.  For those doing both, it's a wash.  The market will not return to pre-2005 levels anytime soon, maybe not for a long time.  So diving in now actually makes more sense than it did several years ago. 

Of course, I'm only discussing house values here, there are always other considerations such as available credit - a subject for another day's post.