I am going to come clean from the outset and say that, “no,” I don’t have the stones to make the call that we have indeed hit a, “bottom,” in the housing market. But I have seen a couple of things lately that lead me to believe we are at least close.

One revelation that I had recently was that consumers may have finally moved on from hoping that we will again see the market conditions experienced during the ref-boom. This dawned on me after a conversation with a client who was having particular success with a mail campaign. They attributed that success to the timing of the drop in conjunction with Bush signing into action the Housing Bill. I don’t believe that there was any correlation because if there was, we would have likely seen inquiry volumes spike in the Internet lead gen industry. But things have remained relatively flat and I think this is a good sign.

If you remember the beginning of the year when the Fed lowered interest rates for several consecutive quarters, inquiry volume and mortgage applications spiked. I think consumers still had the unrealistic expectation that the Fed rate can directly influence mortgage rates, moreover I think they unrealistically believed that the lower rates could bring back the frenzy of mortgage activity we were seeing up until a couple of years ago.

Since then we have seen even more Fed rate decreases coupled with instances of the Fed rate remaining unchanged in the face of inflation. We have also seen a major piece of sweeping legislation tailored to provide a boost to the mortgage industry. In as much time, inquiry and application volumes have remained relatively flat. I think this is a reflection of two potential things:

a) Defeat. The consumer is beaten and broken and is as unresponsive as your stoner-cousin for whom nothing would lift him off the couch.

b) Complacency. The consumer’s expectations have been re-set and they know the frenzied environment of the refi-boom is likely never to be seen again.

I believe we are seeing “B” which, while it certainly presents a more challenging arena for business growth, it is at least more realistic than consumers thinking that a 2% Fed Funds rate means they can refinance their house at 2%. Call me an optimist, but I actually think that this complacency hints at a bottom because with consumers no longer having unrealistic expectations, then maybe we in the mortgage business can get back to helping people and solving problems rather than refinancing with cash-out so that someone can finance a lavish vacation.

Another encouraging sign that I saw recently was in an article here hinting that California may be at a bottom in the realty and housing market. Like me, the author wasn’t bold enough to call an actual bottom, but he cited many indicators that provided hope.

• “A rebound in home sales as renters become home owners”
• “Stability in the pricing of Homes”

Specifically he claims, “Home ownership in California is growing affordable again thanks to reasonably low mortgage rates and the fall in home prices, fuelled by the firesale of foreclosed homes. As a result, home sales are picking up, foreshadowing a stabilization in home prices before year end.”

His argument is essentially, then, that since California constitutes 25% of the housing market in the US, as goes California, so goes the rest of the country.

I hope he is right. There is no doubt that we in the mortgage industry are looking for some wind for our sails. Hopefully this can provide a little of that. I, for one, feel that we may be rounding a corner. Any thoughts?

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