Just read a fascinating report from CNNMoney about the prospects for the housing market in 2008. First, they talked about about all the major predictions for 2007 that were way off base. From Bernanke's speech in November of 2006 saying that he saw "encouraging" signs in the housing market, to NAR's prediction of a 1% drop in prices, to the most pessimistic prediction of Standard & Poor's David Wyss of a 7% drop in prices, most were way too optimistic. Depending on what you read, and how badly they've confused a drop in sales units with a drop in prices, sales were down about 12.5% in 2007, with prices overall down almost 7% nationwide. This is not much help to those of you who live in areas where sales were off 35% and prices down 15%, but as I've mentioned before, there were some parts of the country where sales were up and prices were up, and that softens the averages.
The scariest part of the report has to do with the Chicago Mercantile Exchange's futures contract for 10 major metropolitan areas. That's right, you can gamble on housing prices going up or down in various regions. By the end of 2006, these contracts were pointing to price declines of 5-7% nationwide. In other words, they were right on the money. The bad news is that these futures contracts are currently indicating price declines of 4-14% in 2008! Here's how I'm consoling myself when I look at these numbers. First of all, just because the CME was right about prices last year, doesn't mean they'll be right again. Futures contracts are indeed a gamble, and the house wins more often than not. Also, all real estate is local, and the west in general and the Denver metro area in particular seem to be improving. In my customer service job I get to talk to dozens of Realtors every week, and virtually all of them are reporting a significant increase in activity and closed business over the past 2 months. I know this isn't happening for everybody yet, but in this area at least, signs are pointing to a very healthy spring. Hang in there!