In an interesting article in the Minneapolis Star Tribune this morning, Eric Wieffering does a nice job differentiating a bottom from a rebound. He compares the dot com bottom and the bottom in tulip prices to an eventual housing bottom. He makes a valid case for caution by anyone who expects the eventual end of home price deterioration to be followed by a rapid return to previous levels. It's difficult to argue against his opinion.
We are not going to run out of houses any time soon, no matter what the price. Inventory, in most real estate terms, refers to the number of homes actively being marketed for sale. The other way of looking at inventory is that there are probably more homes in this country than there are potential occupants, whether owners, renters, or squatters. The market needs to work through both kinds of inventory before there can be any significant increase in home prices. It is more likely to be a very long process, at least a generation, before we see substantial increases in housing beyond the pace of inflation.
Wieffering points out that NASDAQ is still significantly lower than its 2000 peak. Tulips, which hit their speculative peak 475 years ago, have still not recovered. Home owners who have delayed making a lifestyle decision in anticipation of a price rebound could be waiting a very long time, maybe forever.
If you're hoping and praying that the opportunity for a gain you could have taken in your home a few years ago will be back again soon, it probably will not happen. Just like last week's lottery, it's over, and it's time to move forward. If you love where you live, it's as good a place as it was when it had a higher value. If you don't like where you live and want something better, now is the best possible time to begin the process. It's time to get on with your life and your lifestyle.
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