There are some signs for hope that the swooning housing market is beginning to find its footing. A survey from the National Association of Home Builders shows that home prices have now fallen to the point where homes are more affordable than they've been in at least 18 years.
Nobody who owns a house likes to hear that home prices are falling. But those falling prices themselves are actually a powerful force when it comes to fixing the housing market. That's because cheaper homes get more people buying again.
Mark Zandi, chief economist of Moody's Economy.com, says these latest affordability numbers are encouraging.
"The bottom in the housing market is coming into view," he says. "Home sales have stabilized from where they were at the end of last year. And that's because of the much improved affordability. You combine record-low mortgage rates with these very low house prices, and housing becomes much more affordable. People sense that and are now going out and looking at homes, and some are even buying."
Jobs, Psychology Hold Housing Back
But why aren't buyers flooding into the market?
"Well, there are still two big problems in the housing market," Zandi says. "One is jobs. We're losing lots of them, and unemployment is rising. Not until the job market stabilizes will we see home sales really begin to pick up.
"The other is psychology: People see prices falling and they don't want to catch that falling knife. They want to get the price at its lowest price, so they're still waiting. They sense and feel, probably rightfully so, that prices are going to move even lower and affordability will move even higher."
Zandi predicts house prices will continue to fall, at least through the rest of this year.
The foreclosure mess is a big obstacle to recovery. Millions of foreclosed homes keep getting dumped on the market at fire-sale prices. So, Zandi doesn't see prices really stabilizing until the government and the lending industry manage to prevent more foreclosures.