You may have seen the recent headline that the housing downturn we are currently in is worse than the one experienced during the Great Depression. According to Case-Shiller data, prices have fallen some 33 percent since the market began its collapse, greater than the 31 percent fall that began in the late 1920s and culminated in the early 1930s. True enough, but the reality is this: Your community may or may not be in a double dip in home prices, cratering to the worse fall since the 1930s. I say that because, simply put, there's not just one real estate market. Every state, city and county can have different dynamics depending on local factors.
However, if you want to know the future of your own market - here's how to read the local tea leaves. First, check out your local employment picture. Are companies still in layoff mode? If people are still losing jobs it will be difficult for your housing market to recover. That's because people without jobs don't typically buy new homes. If there are consistently lots of ads in the paper for jobs and stories in your local newspaper about local employers expanding, your community may already be in recovery mode.
Time on market is another important consideration. The bust has meant that the inventory backlog has expanded as homes fail to sell. Currently, the national market is experiencing a nine months backlog of housing. More competition means lower prices and lower prices is bad for the market. If your town has inventory of just three to six months, your market may well be on the road to recovery. Scans local realtor websites or the local realtor's association website for details.
And, finally, check out the number of foreclosures going on in your city by going to RealtyTrac.com. Areas with high foreclosure rates - think Nevada where one in every 103 housing units received a foreclosure notice in May - will be the last to recover. And, remember - it's not a national market. While Nevada's foreclosure rate has skyrocketed, only 1 in every 9,589 housing units in North Dakota have received a foreclosure notice.
In truth, it's all relative. My home was built in 1933 - in the depths of Depression. You'd think nobody would have the capital to build. Clearly not true. There are exceptions to every rule - and may your neighborhood be one of them!