I'm Sticking to My Guns on Housing

It's not easy being the only guy on earth who believes that house price stabilization is upon us and that house price depreciation is in the past. Not easy at all. In fact, the belligerent press I get on it is only exceeded by everything else I say!

But let's go over the data. The classic signal of a bottom requires two components: gigantic increases in sales and stabilization of price. Those are always the bottom and have been in every single housing cycle. Would it kill the opponents of my thesis to look into that fact?

Now, the worst four housing markets in the country -- California, Florida, Arizona and Nevada -- have all seen that exact combination, with Nevada being the latest in stats that came out yesterday. These four states represent 50% of the housing market. So, we have the definition of the cycle bottom -- not appreciation but stabilization -- in half the market, but more important, in the part of the market that caused the housing crisis.

When I made my prediction a year ago that we would bottom and house prices would stabilize at the end of this month, I made it clear that I was calling for the classic cycle bottom: drying-up of inventory because of a sales explosion coupled with price stabilization, and we are having that happen in the most problematic half of the market.

We keep getting more confirmatory data why. This morning Lennar (LEN - commentary - Trade Now) reported a really good quarter and commented that cancellations were down 15%. We have seen numbers in the $40s during the free fall. What does this mean? Buyers are finding ways to get credit rather than show remorse. They are using the $8,000 credit and taking advantage of rates that are a full point below last year's rates.

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