Let’s suppose you are heavily invested in the stock market and your entire portfolio consists of thousands of shares in the stock of just one company. 

Now, imagine that the only information available to you about the value of your stock is the level of the Dow Jones Industrial Average.  That’s essentially the position we find ourselves in when it comes to valuing the investment in our homes. 

 The release of the Case-Schiller Price Index for May spurred a lot of discussion that the national housing downturn may be nearing “the bottom.” The New York Times writes that “Recovery Signs in Housing Market Stir Some Hope”. This is welcome news, of course, especially since housing woes are inextricably linked to the global recession that began in early 2008.  However, the only housing data point that really matters for most of us is the value of our own home.  While the national and major metropolitan statistics are indicative of broad trends that ultimately affect the value of all homes, they actually tell us very little about what our home is worth right now.

So that leaves the obvious question:  has our local housing market found a bottom? 

The short answer is not a very satisfying one:  it depends.  If we define the bottom in terms of the number of homes selling – or the liquidity of your real estate investment – the worst is probably behind us.  Between the first quarter of 2007 and the first quarter of 2009, sales of residential real estate in Westchester, Putnam, and Dutchess Counties dropped by more than 50%, to levels not seen since the late 1980s.  In the second quarter of 2009, the combination of lower home prices, tax incentives for entry-level homebuyers, and relative economic stability gave us a bounce in home sales, especially for homes priced at or below $750,000 in Westchester and $300,000 in Putnam and Dutchess.  The Poughkeepsie Journal recently reported on this trend. 

The price correction at the low end of our market began more than 2 years ago, when subprime lending dried up and the market was limited to buyers who could reasonably afford the homes they were purchasing.  As of today, the balance between supply and demand, which I discussed previously, would suggest that prices at the low end of the market should begin stabilizing near current levels in the second half of 2009. 

The high-end of our market (over $2 Million in Westchester; and over $800,000 in Putnam and Dutchess) did not begin to feel the effects of the housing downturn until about 1 year ago.  That’s when the credit crisis began to take its toll on the earnings of the broader Wall Street community, who generally set the tone for the high-end housing market in this area.  Our observations on this market are consistent with a recent report in the Wall Street Journal - the high end of the housing market probably has some catching up to do with the low end in terms of price correction.

Timing the real estate market is almost impossible, especially since real-time data is so hard to come by.  It is often said that by the time we can say definitively we have reached a market bottom, it will already have passed.