Virginia Beach Housing Bottom – Is it time to buy yet? - Virginia Beach Neighborhoods

The problem with recoveries is that we don’t usually recognize them until they have already happened. Is the housing market recovering right now? The stock market is certainly having a great rally and pending home sales seem to be on the rise in Virginia Beach this month. But one month of improving data hardly defines a recovery. In six months will we know the answer, but not today. Here are some reasons to be both optimistic and pessimistic.

Reasons To Be Positive

There are certainly positive signs that make me optimistic. Interest rates are at an all time low. Not only that, the spread between the 30 mortgage and the Federal Reserve’s rate to lending institutions is at an all time high. This means that the banks could drop rates further and still make money (they don’t because they are recovering from massive losses and need the money). Will we see lower rates? Who knows? The Fed may raise rates if the banks start making too much money or if the banks continue to lower the mortgage rates. Nobody, not even the Fed, knows what the future holds. But low rates make it easier for everyone to buy a more expensive house and that is a positive for housing.

Another positive sign is that housing prices in many areas have fallen to a point where buyers feel that they are getting great deals. If prices fall further, then today’s good deal clearly isn’t quite as good as what it could be tomorrow. It is true that buyer sentiment plays a large role in any recovery. When the buyers stop waiting for the prices to drop and start buying again, the bottom is near. Are we there yet? Nobody knows. But right now there are buyers feeling that they are getting good deals.

We already know the negatives; job losses, foreclosures, very high supply, loss of easy money, price depreciation, etc. Home prices in Virginia Beach had never fallen until 2006. This made real estate seem like a sure thing investment. Where else can you put zero down and keep all the profits? As home prices soared, everyone wanted a piece of the action.

Home prices in the US were fairly flat in the 90’s. In Japan, home prices are still below where they were 15 years ago. Now, explain to me why home prices should be higher in the United States today, in the middle of the Great Recession, than they were in 2000, at the height of the dotcom bubble. Seriously, there is a place at the bottom of the page for you to leave your comments and I would love to hear your thoughts.

There is more supply and less demand today, but it is cheaper to borrow money. The real estate market has shown that it can pull back sharply, but it has already pulled back so much. There is one thing that I can say with complete confidence. We are closer to a housing bottom today than we were a year ago. The National Association of Realtors said housing had bottomed in January of 2008. Their forecasting needs some fine tuning. Jim Cramer on CNBC says that housing will bottom on June 30th. We will see. There is a Money Magazine article that says the bottom will come in the first quarter of 2011. Who knows?

I know I can’t see into the future, but I know the Virginia Beach housing market like the back of my hand.

What do you think?