Monday, September 22, 2008


While tough recessions effect both real estate and manufacturing, these sectors take turns bearing the brunt of down turns. This can be seen by when the turn in housing supplies occurs.

During manufacturing recessions, the months supply of homes for sales tends to start dropping early-on. During a housing recession, home sales do not pick up steam until the end of the down turn. Just at end of these downturns, there is a sharp drop in months supply.

Months supply was at 10.7% in June. In July months supply fell to 10.1%. Since July, the turbulence in the banking sector pushed fixed mortgage rates higher, until 8 weeks ago. In the past 8 weeks, 30-year mortgages rates have fallen from 6.5% to 5.6%. The effect of the bank bail-out this week will be to give confidence to buyers. The big turn in housing sales is here. Housing sales will not return to the crazy days of 2005 anytime soon, but sales are already higher than new completions. Inventories are already falling. A few decent months of sales will clear out a lot of mis-priced bargains. The time to get the best deal is now! Buy on a low cost variable rate loan to get the maximum savings. Wait a year or two before locking in to a fixed rate loan.