Few people have noted the similarities between home prices and commodity prices over the last 10 years, but if you look at a chart of prices , you will see a large almost straight line run up in prices between 1999 and the end of 2005. At that point in time prices actually quit rising and leveled out or even went slightly down for 2 years prior to the crash. Like commodities , real estate values were governed by a herd mentality on the way up which caused prices across the country to rise much farther than they should have risen. Momentum is a very powerful thing, just ask any commodities trader who makes boat loads of money just following the current trend even if it does not make fundamental or logical sense. Home prices did the same thing prior to 2005. I bring all this up because now the momentum in the housing market points to even lower prices across the country, possibly much lower. As with commodities , the herd mentality and momentum will take home prices to much lower levels.
You will know that home prices have actually reached bottom by looking at news and print articles and listening to all the so called experts. Once most of them are convinced that the housing market is totally dead and will never rise again, that is the time to run out and buy because that will be the bottom of the market. Based upon the amount of foreclosures and short sales real estate values are going to keep going lower for at least the next year and probably two, so save up your down payment money for when the market really does hit bottom. Don't worry , I will let you all know when that is.
