Here’s an article from a top real estate advisor suggesting a bottom has been reached in the dismal homebuilding market.

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ALMOST EVERY DAY THIS PAST WEEK I HAVE WITNESSED SELF-APPOINTED EXPERTS SAYING THAT THE HOUSING COLLAPSE IS ON ITS WAY TO BEING THE WORST SINCE THE GREAT DEPRESSION OF THE 1930’S. IT TAKES ME LESS THAN ONE MINUTE IN EACH CASE TO REALIZE TWO FACTS ABOUT EACH OF THEM. FIRST, THEY DO NOT HAVE A CLUE WHAT HOUSING WAS LIKE IN THE GREAT DEPRESSION. SECONDLY, THEY ARE SIMILARLY CLUELESS ABOUT WHAT IS GOING ON IN HOUSING TODAY. ALLOW ME TO OVER-SIMPLIFY TO MAKE A POINT.

BACK IN THE GREAT DEPRESSION, IT WAS NEARLY IMPOSSIBLE TO BUILD AND SELL A NEW HOME. IT SEEMED THAT NO ONE HAD ANY MONEY. WHAT’S MORE, THE FED HAD CUT THE BASIC SHORT-TERM INTEREST RATE TO 1.00% BUT EVEN WHEN A BANK HAD ENOUGH COURAGE TO OFFER A MORTGAGE LOAN, HARDLY ANYONE WAS BOLD ENOUGH TO BORROW THAT MONEY. THE GENERAL FEELING WAS THAT SOMETHING WOULD GO WRONG AND THEY WOULD NOT BE ABLE TO PAY BACK THE LOAN. THE SITUATION TODAY COULD NOT BE MORE DIFFERENT.

THERE IS A LOT OF MONEY ON THE SIDELINES. NOT JUST THE LATENT WEALTH LOCKED UP IN HOME VALUES BUT IN THE CASH SAVINGS THAT HAVE BEEN PILING UP. THE BASIS PROBLEM WE SEE IN HOUSING TODAY IS THAT BUYERS ARE CIRCLING THE AVAILABLE HOUSES LIKE SHARKS IN THE WATER. THEY ARE WAITING TO SEE IF PRICES ARE GOING TO FALL. BECAUSE THE TRUTH IS THAT HOME PRICES, EXCEPT IN A HANDFUL OF WELL-PUBLICIZED AREAS SUCH AS CALIFORNIA’S CENTRAL VALLEY, HAVE NOT REALLY DECLINED BY ALL THAT MUCH.

WHEN I CALLED FOR A TIME-OUT IN HOUSING IN MID-2005 I SAID I ENVISIONED AN AVERAGE PRICE DECLINE TOP TO BOTTOM OF SOME 10%. AND THAT IS WHAT WE HAVE SEEN SO FAR. THE STATISTICS WE SEE AND HEAR BEING QUOTED OFFER A DISTORTED PICTURE OF THE TRUE DECLINE. JUST THIS MORNING WE SAW ONE ANALYST WITH A PENETRATING INSIGHT. THEY POINTED OUT THAT BANKS AND OTHER LENDERS ARE DRAGGING THEIR FEET IN LENDING MONEY FOR HOUSES OVER $400,000. THEY PREFER INSTEAD TO LEND THEIR MONEY TO BUYERS OF HOMES IN THE LOWER PRICE BRACKETS. THAT CAUSES BOTH THE MEDIAN AND AVERAGE PRICE REPORTS TO SHOW DECLINES. BUT IT DOES NOT MEAN THAT INDIVIDUAL HOMES ARE FALLING AS FAST AS THE POPULAR MEDIA BELIEVES. AND NOW THE FHA LIMIT MAY BE RAISED!

I have to tell you, and this is based on 40 years experience with housing and banking, that the recent decline is acting like a normal time-out in housing. I have seen them again and again. They all ended and then, as in 1992 with hardly anyone noticing, began to turn up again. Each time the bottom was marked by nibbling at bargains and then aggressive buying by alert, cash-rich men and women. Invariably these early buyers were intelligent and informed. They had been watching housing for some time. If you have ever seen a cat stalk a mouse and then pounce on it you know what I mean.

Right now I believe I am seeing this quite-normal and expected signal of a bottom forming in housing. No doubt you saw the reports last week of a great rush to buy housing units in Manhattan. We are close to having a shortage of good housing in America’s financial capitol. Far from collapsing, prices there are strong and rising. And now comes word of another uncommonly strong housing market. North of San Francisco, in Marin County, there is an area blessed by nature with a stunning vista. San Francisco Bay is on one side and the Pacific Ocean is on the other. Giant redwood trees rise majestically into the sky. And nestled there on the hills sit some of the most sought-after homes in America. This is a cash-only market reserved for the very rich. They do not go to banks and beg for money. They just write out a check.

Actually I have heard stories of how some of the buyers simply put their new mansion on their platinum credit card. I am talking about three million dollars and up. But the main fact I want you to note is that the median price of a home there is now 9% above a year ago. These buyers are sensitive to trends. They do not watch a television news show and allow their emotions to carry them into a mood of despair. They are old enough to have two or more housing corrections under their belt. When I see them quietly buy like this, I feel confident the next major move in U.S housing will be higher.

AND IF YOU DO NOT ACCEPT MY IN-DEPTH EXPERIENCED VIEW, LISTEN TO THIS: BCA RESEARCH fed numbers from the 1980 Japanese collapse, the 1929 stock crash, the dot-com collapse and others into a computer. They formed a pattern. They overlaid this pattern with the 2005-2008 homebuilders’ collapse. This is a perfect match and suggests we are at the bottom now!

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