Things are looking up?

Mortgage rates at a record low, new home buyer incentives and mortgage default assistance packages, and a recovering stock market. These are confidence builders.   There are negative influences too that need to be considered.

Take increasing unemployment.  Unemployment is a result of less demand for goods and services, but it generally lags behind the drop in demand.  Unemployment drops after demand drops and increases only after demand increases.  Do you think the massive stimulus packages will cause an increase in demand for goods and services?  So do I, the question is when.

There is another cycle of questionable mortgages that will have interest resets over the next few years, about as large in number as the first cycle that resulted in the current rash of defaults.  This time we have mortgage relief plans as well as general economic relief plans that may prevent the rash of defaults that drove down housing prices.

We have a huge inventory of homes at low prices that seem to continue to drop.  One good reason they are dropping is that people are afraid the prices will drop some more, and they might, but when you look at all the above, there are now reasons they won't - that fear will disappear as the economic outlook improves, and buyers will take advantage of the obvious bargains that exist, and many sellers may decide not to sell. 

Prices are down 50% in some areas.  Will they go down another 10% ?  Maybe, but would you rather wait for that, or suddenly find yourself where the prices have gone up 10% ?  In other words would you rather pay $200,000 now for a home that was $400,000 or take the chance of paying $240,000 later when you hoped it would go to $160,000?  It can change in a blink.

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