You are going to hear this phrase more and more as the housing market stabilizes. It means from the top of the market to the point at which we no longer see declining numbers.
Moody's says home prices in the United States will hit their low point in the fourth quarter of 2009, with the Case-Shiller Home Price Index expected to show a 36.2% peak-to-trough decline. The peak was reached nationally in the first quarter of 2006.
The Seattle Case-Shiller Home Price Index from January 1989 until January 2009.
The peak in Seattle was June 2006. If you follow the index, that means a home bought at the peak of the market in Seattle for $350,000 will ‘trough' at $233,009.
Today that home is valued at $257,080.
(A past Trough) Seattle Case-Shiller Home Price Index from November 1989 until December 1997
According to this theory, we will see another 5-6% decline from today before the trough starts. Home values will go back to March of 2003.
That means if you want to buy this home but are waiting for the bottom, it will bottom out for about $24,000 less than if you bought it today. At a 5.5 % interest rate, it's about $135 a month. A move of the rate a one point adds/subtracts about $15 a month.
I believe our market will trough during May of this year and because of a shortage of new construction, starting in September will will experience an inventory shortage.
The Case-Shiller Home Price index will prove me right or wrong but not until July 20, 2009 and we will start see facts pointing to the shortage in, well, September.
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