Housing prices will bottom in Q1 2009, says Wachovia (WB), in another view of the housing market that is probably too optimistic. After more weak numbers on housing last weak, Wachovia seized on record low builder sentiment and buyer traffic numbers as reasons why housing won’t recover immediately:
Builder sentiment fell back to its all-time low in June, as builders reported a slight dip in buyer traffic. The lack of improvement in buyer traffic likely reflects tightening credit conditions and generally weakening economic conditions. Affordability has improved tremendously but lower prices will not turn the market around by themselves.
Until employment and real wages begin to strengthen again, the chances of a sustained recovery look remote. But Wachovia still expects prices to stop falling in 6 months or so and start improving next year.
We expect sales to bottom out late this summer but do not look for any significant improvement for about a year. New home construction will likely decline right through the end of this year and should bottom out either late this year or early next year. Housing prices will likely hit bottom in the first quarter of 2009, which is also when we believe foreclosures will top out.