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.