Quote:
Originally Posted by LeeH
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Volumes initially bottoming then rising are a prelude to accelerating price declines.
That's the way it worked in CA during the 1990s housing bust and that is the way I expect it to work in the current national housing bust.
When the price declines start, volumes dry up because sellers won't accept the lower prices. They take their homes off the market and vow to wait until prices recover. Eventually, many of those sellers are forced to put their homes back on the market at prices below the first attempt. The compulsion can be from financial pressure (can't carry the house any more), life pressure (got to move for a new job etc), or simply reality setting in (prices are not going back to 2006 highs for a long time). Then volumes rise, and rise, as prices fall, and fall.
In the 1990s, in CA, volumes dried up right after prices began to fall, then grew until by the mid-1990s, volumes were almost back at the peak. As many people were selling into the trough prices of 1995/6 as had been selling into the peak prices of 1989.
There are some differences this time. Credit has dried up much more than it ever did in the early 1990s, so if the government can get credit to come back, that will help volumes - but not prices. When credit returns, it won't be zero down on imaginary income - which is what drove prices to the peak.