Housing starts are at record lows.  Building permits fell 1.3% from the previous month showing a level not seen since March 1991.  Builder confidence is at a 22 year low based on the NAHB Housing Market Index (HMI) which dropped to 18.  

The economy itself is also facing a recession according to Greenspan.  I personally feel that we were in a recession last quarter and possibly facing a long term recession or dare I say a depression.  I say this because the real estate market and Wall street are the too largest investment vehicles that investors have.  Usually when Wall street is doing well investors will pull money out of the real estate market to invest into stocks and vice versa.  Right now the Dow Jones suffering a 20% decline since October of last year when it was at 14,164 and currently closing on Friday at 11,346.  And the real estate market is showing a record number of foreclosures that may top 1,000,000.  This is forcing most investors to park their money in cash accounts or government bonds until the smoke clears.  This will only prolong the recession because of the lack of confidence and lack of cash infusion into either arena.  Now you also need to add that interest rates are heading up, qualifying for a home is harder, and inflation is on the horizon, and you get the perfect storm for the United States.  This may compare to the Great Depression of the 30’s.

The silver lining is that I see the bottom of the market to be mid or late part of 2009.  2010 and 2011 will be time to shop and look for great investment opportunities.  1-4 Family units that actually debt service themselves and even show positive cash flow.  If you buy right now make sure you bargain hunt and don’t be disappointed if you equity disappears in the first 2-3 years.  Eventually is will come back and if you are looking for long term investments then this is the market for you.  Keep a close eye on interest rates and keep a close eye for auctions and bank owned properties.

As Posted in the New York Times

"Although many Southern metropolitan areas have high percentages of subprime mortgages, homeowners in those areas have largely been able to pay their bills, so subprime foreclosure rates are low.

Not so in the Rust Belt, where subprime mortgages are less common but foreclosure rates are sky-high, mostly a result of rising unemployment.

And overbuilding in regions of Florida, California and other states with housing bubbles lured overeager residents to become speculators, buying up many homes with the expectation that their values would rise. Getting subprime loans was all too easy.

But paying the loans as housing prices fall is all too hard, and many economists believe that foreclosures will continue to rise.

“The collapse will affect other markets, like New York, Boston and D.C.,” said Dean Baker, co-director of the Center for Economic and Policy Research. “Suburban areas near those cities are already seeing prices plunge.” "

I think that this article is premature and most people are hanging on by a thread.   What has happened historically is that lower income areas are hit first and the hardest.  For example, in Southern California, Riverside and San Bernardino have already felt the impact of the foreclosures and the market in general has seen a 30-45% drop in prices.  This will gradually move into Los Angeles county  and then migrate up into the higher end market. 

Property values in South Bay are near Torrance, Redondo have already seen some 15-30% drops.  The prices will continue to drop until 2010 and then remain flat until at least 2013.