The housing market has to run it’s course to see recovery

Everyone and their mom has a solution to deal with the housing crisis, but ultimately programs and bailouts that only scrape the surface of the issue are not going to bring us back to “normal” until distressed inventory runs its course and employment in the Sacramento area begins to see significant improvement.

Short-term Market Boost: When I look at graphs like the one below, I’m reminded of what it looks like for a short-term program to enter the marketplace to help boost the economy. Ultimately, the tax credit from 11/07/2009 to 09/30/2010 had a positive impact on the market and surely saved some homes from foreclosure too. Yet the boost it gave to the housing market for a matter of months could not hold back the inevitable decline in property value though either. My point? Every day we seem to hear of new solutions to fix the housing market, but as painful as it is, the market may just need to bleed for a number of years ahead. As much as we’d like a quick fix or program, that’s probably not going to happen because we need time for the market to work itself out of the mess.

The graph below is based on research in the Churchill Downs neighborhood in Sacramento. I could plot out many areas of Sacramento and a very similar trend would be seen: stability during the tax credit and a decline afterward.

What do you think it looks like for recovery to unfold? Do you think we’ve hit bottom? Why are we not seeing a surge in property value right now in light of such low inventory levels?

Churchill Downs in Sacramento Trend Graph by Sacramento Home Appraiser

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