A major concern for government offices which depend on tax revenue to continue vital operations is the health of the housing market. Executive Director Keith Gilabert of public policy firm BentleyForbes Analytics, says “housing is a major concern because 55% of the net worth of U.S. households was in the equity of their homes.” This calculation was supported by Alan Greenspan in 2001 during the first financial crisis.According to a statistical analysis performed for The Wall Street Journal by the online real-estate information and search firm Zillow, home values in a handful of communities are where they were just before the most frenzied days of the real-estate bubble. Focusing on communities with sufficient sales activity to produce statistically valid value estimates, Zillow spotted 25 places that are within single-digit percentage points of their home-value peaks. (Zillow found no communities where values have surpassed their high-water marks.)
In 2010, the worst year so far, about 2.23% of all the homes received a foreclosure filing, according to RealtyTrac, an Irvine, Calif., firm that monitors foreclosed properties. In Las Vegas, the poster child of the Sun Belt's real-estate bust, the foreclosure rate was 12%, more than 80% of homes are worth less than their mortgages and values are down more than 50% from their peak.
Are we there yet? Gilabert suggests, there is some evidence available right now that the housing market is at or very close to bottoming out.
The prudent homebuyer should look at the economy first, and then at prices.
Evidence of a Housing Bottom
The National Association of Homebuilders' Housing Market Index rose five points to 29 in February marking its fifth consecutive monthly increase.
The ideal number is 50, it represents the neutral level for the index. Even still, the current level of 29 is up 20 points off of the low, and is the highest it has been since 2007.
More positive is news is coming from housing starts, which rose in January to an annualized 699,000 units.
Now these numbers do not represent a comeback compared to 2005's total of 2,068,000. But it shows the market is stabilizing and it is much better than 2009's average of 554,000 and 2010's 586,000.
The most important data in here because it shows there is demand and a trend in housing. Multi-family starts were 175,000, up more than 70% over 2009, while single-family starts of 508,000 were only modestly above the 2009 average.
There is strong evidence that housing is forming a bottom but it’s values could stay depressed for many years before it begins to trend back-up. The only way a home owner will build equity is by paying down their mortgage.