I was fortunate enough to have dinner last night with Dr. Jed Smith on his trip to Boise to talk to the Ada County Association of Realtors Annual meeting. With the current upheval in the financial markets, we couldn't have chosen a better time to get his insight. A few key points he made was that he felt we were really close to the turn around point of the housing market because:
- Inventory is shrinking,
- we aren't adding in new inventory very fast (new construction slowdown),
- interest rates projected to stay low;
- we have corrected many of the things that lead up to this;
- He said home sales nationwide are well below their unrealistic peak but stabilizing now.
A lot of the problem before was the excess money in the market which allowed for the sub-prime market to go from $295 million in 2001 to $882 million (nearly tripled) in 2004, to $1.138 Trillion in 2005. It started back down in 2006 to $1.051 Trillion. By 2007 it had already dropped to $466 million. He said that even though the sub-prime market only accounted for 9% of the lending portfolio, it accounted for 53% of the foreclosures! In conclusion, he said he felt we were pretty close to the bottom based on the "known" factors, but this is a unique time that he said is best compared to the 1907 market. We still don't know the "unknown" factors that still may be lurking around the corner (inflation?, hedge fund impacts, consumer confidence, international markets, etc.) When things like this happen, he said, we tend to "overshoot" the target so there are profits waiting for those that time the bottom correctly.
Jim Paulson, CRS, GRI, EPRO - Owner/Broker - Progressive Realty Corporation