Are housing prices near a bottom? It’s not just policymakers, realtors and bankers who yearn for the turn. Anyone who owns a house, a condo or coop is surely wishing for some modest improvement. Not the least of these hopefuls is homeowner-in-chief Ben Bernanke, chairman of the Federal Reserve Board, who just this past Friday lamented the heavy toll that tumbling housing prices are having on residential investment. Here’s what Bernanke had to say about housing in his speech to economists at Jackson Hole, Wyoming:
“Household finances and attitudes also bear heavily on the housing market, which has generally remained depressed. In particular, home sales dropped sharply following the recent expiration of the homebuyers’ tax credit. Going forward, improved affordability–the result of lower house prices and record-low mortgage rates–should boost the demand for housing. However, the overhang of foreclosed-upon and vacant housing and the difficulties of many households in obtaining mortgage financing are likely to continue to weigh on the pace of residential investment for some time yet.”
That’s a polite way of saying the housing market should improve but it probably won’t.
The bottom line for housing is that the bottom will be long–perhaps very long– and bumpy. Even in cities where the numbers are starting to improve slightly, such as San Diego, the inventory of unsold homes never seems to decline. What’s more, we haven’t yet seen the legions of Baby Boomers who are planning to unload their McMansions in favor of some cute bungalo by the beach. They, of course, are just waiting for the market to improve.