Will Lower Rates Spark a Market Rebound?

From Realtor.org: Susanne Cannon, the director of the Real Estate Center at DePaul University, says that at a conference this month with other academics who specialize in housing, the consensus was that many buyers have been waiting on the sidelines until the market hits bottom and then plan to make their move.

Now that lower rates are a factor, Cannon says, the question becomes: At what point will buyers be compelled to act, thinking they are getting a price they can live with and a rate they do not want to miss out on?

Otha Greer, an associate with Coldwell Banker in Jackson, Miss., says the drop in rates ''has lit the fire in my business. I actually had an investor that called yesterday and she's interested in buying five homes.''

Not everybody is persuaded the turnaround has come. A Merrill Lynch report this week said housing prices were ''likely to remain in free fall.'' The report predicted a drop of 15 percent this year, 10 percent next year, and ''more depreciation likely beyond the forecast period'' — despite an expected series of rate cuts.

But Jim Klinge, an associate in San Diego, was closing his fifth deal this month, a decided improvement from the 16 houses he sold in all of 2007. ''It's very hard to find the right house at the right price,'' he says, ''but there's a strong undercurrent of very healthy demand.''

One of caveats to the above story is that many markets across the US did not experience the correction we have felt in the Sacramento area and may already be showing signs of recovery. In the Sacramento real estate market the consensus still appears to be another year, if not more, of depreciating values. Having lower interest rates will help but we still need to work through a huge amount of inventory before any sort of recovery can begin.