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Bottom appears to be near for housing prices

By JAMES THORNER, Times Staff Writer
Published March 7, 2008

On the ups and downs of the market, late economist Milton Friedman once noted that bulls make money and bears make money, but hogs get slaughtered.

Friedman's point was that investors who wait for a market to bottom out tend to miscalculate the timing. Their standoffishness, motivated by a desire to maximize gain, costs them in the end. He was talking about stocks, but his lesson applies to housing.

Here in the Tampa Bay area, rolling out the barnyard analogy is probably premature. A rough consensus of economists and analysts holds that median home prices have a way to fall before they're back in line with buyer expectations and incomes.

But I confess Friedman's image came to mind after I listened to Realtors complain this week about the bargains on the market begging for buyers: bank foreclosures marked one-third off, $150,000 northeast St. Petersburg bungalows priced below $90,000, condos on clearance.

Even builders are waxing conciliatory. A co-worker told me a southeast Hillsborough County builder voluntarily refunded his mother $46,000 midconstruction. The builder cut prices for new buyers and extended goodwill to established customers.

Are such deals stimulating sales? Not much. It's as if buyers suspect a trap door lurks under the talk of price floors.

Let's stipulate inflated home prices of 2005 deserved a nasty pin prick. Let's stipulate further that many sellers still dwell in the Land of Make Believe Where Every House is Made of Gold.

Case in point is the investor who told me he's trying to sell the Clearwater condo he bought for $450,000 in 2004 for more than $900,000. He says foot traffic in his unit has been brisk, but he's been saying that for eight months.

But I suspect that elusive price bottom is beginning to materialize, if mostly via foreclosures. Despite tough talk, banks aren't rejecting too many honest offers. With thousands of properties in default, expect mom-and-pop home sellers to join the race to the bottom.

That's the point when buyers should heed Friedman's hog call. Wouldn't want to miss a rout on account of the snout.

James Thorner can be reached at thorner@sptimes.com.

[Last modified March 6, 2008, 23:05:59]