Posted by Jonathan J. Miller -Wednesday, May 6, 2009, 12:52 AM
There was a front page above the fold story in the New York Times this morning talking about the Sacramento, California housing market and how it seemed to be stabilizing. California is the poster child for subprime lending and was the subject of a sobering 60 Minutes special with James Grant last year.
Prices there are down by more than 50% from peak but sales activity is rising.
Could this mean that the housing market is stabilizing?
The idea pushed in the story is FIFO (first in first out). Markets first to experience weakness may be the first to improve. I don’t see this is a viable explanation on what to anticipate in other markets. The reasons the south and west fell first is from rampant speculation, largely absent in the midwest and northeast.
Perhaps in that specific location. California has been experiencing heavy sales volume as prices come into alignment with the market.
So I wouldn’t hold your breath after the spring market ends. Seasonality means demand is higher now, buoyed by record low mortgage rates and a slew of foreclosures pressing prices to lower levels – making affordability within sight of many.
In addition, there may be a new wave of mortgages in the near future as a result of the Senate’s politicalization of the housing issue with bankruptcy actions.
Still we can all use some glimmer in our lives. I prefer it over green shoots.