Where's The Bottom?

Buyers continually tell their agents they are looking for the "bottom" of the real estate slide to occur before they make a purchase.  Somehow they feel the "Bottom" will be signaled by something significant to let them know that the Bottom has actually arrived. However, nothing like that ever happens.  The Bottom (when it comes) is typically quiet and subtle. This Bottom is no different from Bottoms past.  Further, the only true measure of the actual Bottom is when market prices begin to increase as a result of increased demand and lower inventory. Then it's too late and the Buyer's advantage then shifts to the Sellers.

The Bottom of a real estate cycle occurs when regular people can once again afford to buy houses. It arrives when reduced prices and reduced cost of capital unite to make home buying reasonable again. This cycle's Bottom may arrive sooner than you'd expect since national media attention has driven prices through the floor and our new Fed Chief, Ben Bernanke, has lowered interest rates very rapidly! The peak in house prices was somewhere in late 2005 nationally and in mid-2006 here in Hawaii. Accordingly, this leg of the cycle is now about 3-years old.

Nevertheless, millions of Sellers have yet to re-price their properties to match the current drop in demand.  They, of course, need to make significant price adjustments to attract Buyers. However, in nearly all normal markets the normal person can once more afford to buy a normal house. This means that demand will increase as the public catches on and inventories begin to drop as prices are adjusted correctly.

Buyers who have been waiting on the side-lines to buy property as cheaply as possible should do so while they are the only Buyer the Seller has seen of recent. Before too long there will be several interested Buyers and such advantage will be lost.

The Baby Boomers are now nearing retirement. If one percent move to Hawaii there will be a demand increase on the supply of housing by as much as 70,000 units. If  only ½ percent move here, that's still 35,000 new Buyers.