We Have Met the Housing Bottom, Maybe

For the first time since December 2006, both the Case-Shiller 10-city housing index, and the 20-city housing index, show year-over year growth.  That's good news . . . but don't pull out the Veuve Cliquot just yet.  There's a lot of variation in those numbers.  More than half the cities in the 20-city index still show year-over-year declines; it's just that a bunch of the other cities showed big bounces, particularly in California. 

Of course, California was one of the bubbliest states, so that's great news . . . but Las Vegas was still free-fallin' for most of 2009.  Overall, aside from the "dead cat bounce" in California, and my own city with its government expansion in full flower, the downside news is worse than the upside.

And there's still the big open question of what happens as the government withdraws its support from the housing market.  The expiration of the tax cut has triggered something of a frenzy in DC--we made an offer on a house at above the ask, only to be beaten by a still-higher all-cash offer.  When that abates, along with the seasonal spring boost, the cities that have improved may look more sluggish, and the cities that were still falling may find it harder to turn things around. 

A little further down the road, eventually the government is going to have to stop using the FHA as the backstop for bad idea house purchases.  We easily qualified for a conservative conventional mortgage, but there's a lot of ultra-low downpayment stuff still out there, and I was shocked at the amount that my allegedly stodgy credit union was allegedly willing to lend me--extremely unhealthy multiples of my income, even with a good downpayment.  The fear is that the housing market can't recover without the government continuing to heavily subsidize a whole lot of low-downpayment loans; there's too little home equity out there, and even less in the way of savings.

So take all these figures with a grain of salt.  But even well-salted, it's better than a continued decline.