Is Housing Hitting a Bottom?

The slump in the U.S. housing market, which has been unlike any other since the 1930s, may bottom next month without any prospect of a rebound for another year, Bloomberg news said Tuesday citing estimates from chief economists at Fannie Mae (FNM) and Freddie Mac (FRE), the Mortgage Bankers Association and national realtors and homebuilder groups.

From Bloomberg: Existing home sales probably won’t reach pre-boom levels until the third quarter of 2010 and housing starts won’t surpass 1 million until 2011, a barrier last broken six decades ago, the economists said.

“There are very few V-shaped recoveries in the history of real estate, and this one is likely to be even slower because of the size of the bubble,” said Robert Shiller…who, with economist Karl Case, created home price indexes in the 1980s now used by Standard & Poor’s.

The rebound will be so anemic that 2009 building starts will total about 496,000 homes, the lowest since the end of World War II in 1945, according to the economists’ forecasts.
…
“If you are looking at prices relative to income and rents, you could argue that we are at the bottom, and I’m cautiously optimistic that we may be,” said Thomas Lawler, a former Fannie Mae economist in Leesburg, Virginia. “It’s possible, however, that we could have a second wave of foreclosures and the very small amount of support the economy might have gotten will turn into the reverse.”

emphasis added

According to FDIC, about $40 billion of mortgages at U.S. banks have payments 90 days or more overdue, more than triple the $11.5 billion of homes the banks already hold. Another $78.8 billion are 30 to 89 days overdue, the FDIC said.

Needless to say, foreseeing a return to a normal housing market for some time under the current economic conditions is rather unrealistic.