The Housing Crisis is Over

“The Housing Crisis is Over” so says Cyril Moulle-Berteaux, managing partner at Traxis Partners in New York, in his recent May 2008 opinion article in the Wall Street Journal.

Who is he and what can he know about it? Previously, he was a managing director for Morgan Stanley and left to start Traxis in 2003 with Barton Biggs, a long time Wall Street executive, also from Morgan Stanley. With that much credibility, he must know something about this after all.

So, let’s hear him out. He says that the housing market is bottoming out. This is music to the ears of all the real estate agents in the United States. Not just real estate agents mind you but everyone wanting to sell their homes and all the thousands of would be homebuyers currently sitting on the fence.

What does he base this on? Most importantly: affordability. The real estate boom of 2005 made housing in many areas unaffordable, especially for first time homebuyers and low income families. Here in the Tampa Bay area, many families that needed a larger home sold their home in Pinellas County and moved up to Pasco or Hernando County so that they could afford to buy more space. Many said, “I’ll never be able to come back to Pinellas County and live near the white sandy beaches again.” Others, just plain moved out of state finding real estate prices out of their league. Further, relocation to our area from northern states slowed.

Affordability was caused by reduced prices somewhere between 10% and 20% in most areas, albeit some are higher. Couple that with continuing low interest rates and slow but steady increases in income and you have more people who can afford to buy. And, buy they will. Not too many people actually want to rent and throw money away every month. Home ownership is and always will be the American dream. Our sunny state of Florida has always been the escape for cold weary northerners. They can start packing once again.

Another reason, according to Cyril, is the fact that inventories are declining. New housing starts have dropped significantly and bank owned properties are selling. It’s going to take some time to get through all the foreclosures (which he failed to mention) but he believes that once we reach 5 month’s supply, he thinks that should happen sometime in 2009, the housing market will right itself. History has proved this fact time and time again. This is a simple supply and demand concept that anyone can understand.

 He does make a confusing point in his article that I would like to clarify. He says, “April 2008 will mark the bottom of the U.S. housing market.” “That doesn’t mean that prices are about to return to the heady days of 2005. That won’t happen for 15 years.” I don’t believe he meant to imply that it will take 15 years for prices to return to where they were in 2005. He means that it could take 15 years to return to the next real estate boom – where prices inflate and everyone becomes an “investor” again.

 Is it time to start house hunting? Will prices go lower? No one really knows the answer to this question but what we do know is that Florida prices are low, there are lots of bargains, and it is a very good time to buy Tampa Bay Real Estate.

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