2.3 Million Homes Foreclosed Since 2007: Will the Housing Market Recover Soon?

An Update on Warren Buffet's Housing Forecast

A few years ago an acquaintance handed me his new business card. As soon as I read it, I sensed the housing market was ready for a fall.

What prompted my reaction?
The attractive print on the card included my acquaintance's name: underneath was the title, "real estate agent."

He attended college to train in the sciences, and had worked as a professional in that field. But he decided to give it up to become a real estate agent -- at the worst possible time. He made his career move when countless pricey subdivisions were being built all across metropolitan Atlanta. This was around 2005, about a
year before the residential real estate bubble burst.

That was then. Today, the fallout from the housing crash persists. Here are the facts: Prices of U.S. single-family homes fell for a second straight month in July (Federal Housing Finance Agency, Sept. 22)

U.S. mortgage applications filed last week dropped 1.4% from the prior week (Mortgage Bankers Association, Sept. 22)

More than 2.3 million homes have been repossessed since December 2007. (RealtyTrac, Sept. 16)

Banks repossessed 95,364 properties in August, which is up 25% from last August. (RealtyTrac, Sept. 16)

With the data above in mind -- and considering that 2011 is only about three months away -- read what Warren Buffet forecasted earlier this year for residential real estate: "Billionaire Warren Buffett said the U.S. will recover from the residential real estate slump by 2011 as demand for houses catches up with the supply that accumulated during the bubble. 'Within a year or so, residential housing problems should largely be behind us," Buffett wrote..."Indeed, many families that couldn't afford to buy an appropriate home a few years ago now find it well within their means.'"
-- USA Today Money, March 1, 2010

But despite lower prices and a near record low 30-year mortgage rate (4.44%), many of those families are not buying.

Have we reached a bottom in residential real estate? Well, you might think so after reading this recent quote

from Fortune magazine (9/17): "Despite continued discouraging data from the real estate sector, a few bullish arguments are beginning to emerge. One MIT economist even believes that demand for new homes exceeds residential construction." Then again, read what EWI's Robert Prechter writes in the current (September) Elliott Wave Theorist: "You can bet that at the bottom in real estate prices and activity, newspapers will be unable to find anyone willing to issue a bullish comment."
Prechter wrote this regarding the high number of vacancies in Atlanta's skyscrapers. But the quote applies equally to residential real estate.