Tuesday, March 24, 2009

February housing in review - have we hit bottom yet?

Buyers waiting for a bottom in the housing market may be starting to dip their toes in the water. Some of the hardest hit markets (i.e., California, Arizona, and Florida) are seeing a big upswing of investors buying foreclosures and existing home sales took their biggest month to month increase in 6 years.

In the Cincinnati market, home sales - while still lower on a year to year basis - rose 22% from January to February. Another positive aspect: total inventory continues to decline, dropping below February 2006 levels. That said, foreclosures and other distress sales continue to make up a significant level of sales - nearly 50% of the volume - pushing the average sales price down 18% below last year's level. Also, the absorption rate (months of inventory at current sales rate) remains above previous year's levels.
In the past month, mortgage interest rates dipped below 5% as the Fed implemented steps to buy mortgage backed securities. Economists vary on whether rates will go much lower, but there does seem to be consistency in expecting rates to hover around the 5% mark for most of the year. Coupled with the tax credit for first-time buyers, we can reasonably expect demand to pick up as affordability of homes compares favorably with rental rates.

We have a long way to go before the market is back to a balanced level, but the bottom fishing seems to have begun in earnest.

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