Housing Market Hit Bottom?

The million $ question I know.  Well, it used to be that high...so let's go with the $500,000 question today!  If the current flurry of offers, low inventory and market trends are any indication then it would appear we have hit something on the downwardly moving housing elevator.  Locally, it's almost like we've entered a period of housing "frenzy" with multiple offers at list price or above.  Whether this floor is the bottom floor or just another stop along the way is yet to be seen.  Everyone certainly wants to believe that we have hit bottom and that it can't go any lower. 

Certain housing market indicators and economists might support this conclusion.  The C.A.R. Housing Affordability Index, a measure of minimum annual income needed to qualify for the purchase of the median house price in an area, reached 55 in California and 70 for the U.S. at the end of Q4 2011.  These levels are at the highest points since C.A.R. began tracking them back in 1988.  N.A.R. chief economist Lawrence Yun recently stated "with a sustained downtrend in unsold inventory, this would bring about a broad price stabilization or even modest national price growth, of course with local variations.”

I'm all for a stable housing market...but a "normal" housing market in which both buyer and seller have equality in negotiating a purchase and sale transaction under the backdrop of a more certain and stable macro economic picture works best for me.  Unfortunately, it seems we have entered a period of "frenzy" once again which is unsustainable and at a minimum, not foretelling of a housing bottom.  The frenzy that I'm referring to is the feeling of "missing out" on these low interest rates and "low" housing prices such that near-term stablization and even price appreciation starts to occur, but the 800-lb Gorilla (the U.S. Federal Budget Deficit, entitlements and heavy consumer debt loads) is still sitting on the front lawn.

Until we ship this giant beast off to another country or at least shave it down to the size of a leashable "monkey" then there isn't any chance we have stopped but to catch our breath on this deflationary housing elevator ride down.  Unfortunately, we may still have the majority of our trip still in front of us.

Budgeting Our Way To Greece

President Obama has just released his 2013 Federal budget with a whopping $3.8 trillion in proposed spending.  This figure is only matched in U.S. history with his 2010 budget submission but granted that was at a time when we were fighting two wars and the severe effects of the Great Recession were taking a stronghold into our everyday lives.  A projected $900 billion shortfall in 2013 between spending and receipts translates into much of the same; we need to borrow just to pay our current bills.

When will it stop?  What president and congressional leaders of this country will step forward and actually make the severe cuts that are needed to halt this catastrophic borrowing year-after-year.  The George W. Bush Administration added $5 trillion to our nation's debt load during his tenure as President when initially campaigning on a promise to be the first president to "reduce our national debt by $2 trillion over the next ten years." Neither Republicans or Democrats can find a way to turn the spigot off.

We are on a path of destruction that likely the majority of the people of our nation are completely ignorant too.  In many ways, I believe that comes from our leadership as they seem to turn a blinds-eye to what road we are traveling.  Just improve the economy and it will take care of itself many at the Capitol seem to believe.  However, once the wheels of motion on the credibility of our country turns and our good faith promise of having the ability to pay our debt is viewed from a true lenders perspective, they will cut-off our "line of credit" and start demanding performance in the way of austerity and debt reduction.  Sound familiar?

The austerity, riots, chaos, death and destruction in Greece seems so far away and so unrelevant to a country the size of the United States.  And, with our economy improving, many feel that we are on the road to recovery, the last thing on their minds is a "return to the abyss."  Unfortunately, that is where we are headed.  So, when our national debt begins to approach $20 trillion by 2015 there will be grave concern from main street to Wall Street to the White House and it's not going to be pretty.  I just wish we didn't have to wait so long to actually start to fix the problem.