I'll stick with my same forecast. The market will turn around once we hit 1999 prices.

I do not know when this will occur - although we would have been much closer if the government had not meddled with the market

These old quotations made my day. What qualified these people for so high positions/salaries? Their competence? Are they still there? No more competent people nationwide?

Funny how people are still so clueless. When I think of a housing "recovery" that means lower prices not higher. Why are people so hung up on equity? You cant spend it unless you sell. If you intend to have the same standard of living in the same area, you will need it for down payment. Its the same thing with the tax deduction. All it does is prop up everyones value, it DOES NOT help you get anymore house than you would have gotten without it because house values would universally come down.

A take serious issue with your use of the word "improve." From the perspective of buyers, or consumers, falling prices=improvement.

Policies in a free market economy are supposed to be made with consumers in mind. Our country has a distinctly mercantilist take on the housing market.

Regarding Lawrence Yun, he is nothing more than a credentialed cheerleader. No one outside those who make a living "rent seeking" off the housing market pay any attention to him other than to point and laugh.

That's why I noted that opinions differ on what "improvement" actually is! (I defined "start to improve" NOT as returning to peak prices specifically to avoid people trying to predict when that would happen.) Personally, I would count steadily rising home sales as a sign of market improvement. That would suggest that more people, rather than fewer, see reasons to buy.

Hit 99 level prices, no.

Hit 99 level prices adjusted for inflation, maybe.

Returning to the record high, unlikely.

Americans have not lost their compulsive nature, it was simply wounded. When things seem better (sensationalized by the media) more and more Americans will feel safe. Because feeling safe is important to a lot of people. Feeling safe also has dangerous side effects like feeling invincible and reckless spending.

Please post any more predictions from Lawrence Yun under humor section

1. As long as distress sales dominate home sales, there will be no recovery. Distress sales will continue to keep prices low. In fact, prices should be lower than what they are if it were not for the government.

2. Interest rates can't stay low forever. When rates do go up, home prices will continue to be pressured downwards.

3. Taking away the mortgage deduction will also make values fall further. The only solution to this problem is to change the amortization of mortgages.

4. As long as unemployment stays elevated, less buyers will enter the market. The real unemployment rate is over 17%. How can housing "recover" with unemployment that high?

The housing market won't recover until inflation raises the nominal value of housing considerably. People are loss-averse, so they will not sell at a loss under normal circumstances (the exception being foreclosure/short sale).

A bit of inflation--4 percent a year, like we had under Volcker/Reagan after 1982--would quickly fix the housing market, as underwater borrowers (like me) would quickly go above water, and could then get out of their houses without taking a further financial/credit hit.

It all depends on how you define recovery. If defined as more sales with slightly higher prices each year, it will be a long, long time. If it is trying to get to the floor of the market, it will be a while too, but not as not long for the higher price scenario. With unemployment real high and wages falling, prices will need to keep dropping.

Remember, if you tell a lie long enough it becomes the truth, and it isn't really a lie if you believe it's the truth.

Everyone will take a cut in their real income that will reduce their standard of living by paying more for the necessities of life (food, fuel, and housing) so that Louis, others like him, and the banks can protect their credit rating and balance sheets.

That is economically inefficient, morally unjust, and anti-free market. It is also more or less the play book our central planners are already in the midst of running.

Failure, and liquidation, fire sale, distress prices are as important, and perhaps even more important to free markets than is success and profit. Failure is the sharp teeth of competition which keeps self interest in check. Without it we are left with the privatization of profits, and socialization of losses, that is theft.

Hey Jamie, I like your blog, I read all the links and wanted to chime in on this topic. I think I agree with most others here that an "improved" market might actually mean just getting a "floor" under prices and clearing out inventory. Prices probably won't uptick for several years, at least not once you factor in inflation. Under QE2 conditions, we should see inflation rise to 3-4%, so if housing prices rise 6-8% that's really not much.

Also, it seems like our economy is going to have to GROW to absorb all the new housing out there, as well as re-occupy a lot of the unsold used housing out there. This could mean 2 things--people getting better jobs/better pay and/or new household formation (people moving out, kids graduating college, less house-sharing/renting situations).

The thing is, mortgage rates are going to rise and lending conditions will still be tight. So even if people want to buy in the next yr or two, it might take a while for that demand to catch up with the new lending conditions.

Anyway, great blog, just wanted to agree with others that "improving" could be read as stability, not profitability for builders/RE agents.