Housing starts have declined to a 16 year low.

Housing starts in December fell to their lowest level since 1991 as the credit crunch and slowdown in sales continued to hobble the industry, according to a report released jointly today by the U.S. Census Bureau and Department of Housing and Urban Development.

Privately owned units authorized by building permits in December dropped to a seasonally adjusted annual rate of 1.06 million, down 8.1 percent from the previous month and 34.4 percent from the December 2006 estimate of 1.63 million.

Why is this good news? As you probably know, when too little money chases too many goods you have deflation. Recently there has been a tightening of the money supply, or a credit crunch, which amounts to too little money. We have also had a boom in new construction, or too many homes in the market.

So in order for the value of your home to increase, we need less new construction. Am I making sense yet?

Put simply, less homes being built, means that your home’s value will begin to increase.

But if you do not presently own and are potentially a first time buyer, NOW is the time to buy. Don’t wait for these factors to take effect.

Jessica from the Inman News Blog has written an outstanding post on what people call the “housing market”. Here is a snippet, but I highly recommend you read the whole thing.

Prices will need to come down more in some of these markets where prices soared to outrageous levels during the boom because first-time buyers are having trouble getting in, a problem that dominoes through the entire local market. (First-time buyers can’t get in, there’s no one able to buy the move-up buyer’s house, so move-up buyer has problems selling, keeping them from buying, and so forth.)

At the end of the day, though, people are still buying and selling homes. Marriage, divorce, babies, new jobs — all of the usual suspects which tend to trigger a home sale or purchase are still part of people’s lives. We’re just not seeing sellers who don’t need to move right now selling and buyers who can’t afford buying.

Some companies have already gone under and more likely will shutter. But it’s not the end of real estate sales forever. Buying a home is still an essential part of the American Dream for most people.

In my opinion, we have more of a credit problem than a housing problem (again, at the national level). Those markets hit particularly hard by foreclosures right now definitely have a housing problem and it will take some time and critical leadership to get these cities back on track. But so far, at the national level, the damage from this correction resides mostly in credit markets.

Exactly. Markets are cyclical and we are presently on the end of the business cycle. As she stated, there really isn’t a housing problem, but a credit problem that affects housing. It is all going to iron itself out in the end, but in the meantime the market still isn’t that bad, and when I say market I mean the Nashville market. Some markets are seeing some major changes, but that isn’t a crisis, its a correction. Calm down folks. The good times are still with us.

From the blog Trying to Follow:

The question, as I’ve asked before, is what to do with that money. After considering it last fall, we felt that it would be wise to invest that money in a house. Sounds familiar doesn’t it?

We could’ve taken that money and invested it in the stock market, or we could have given it all away, but the opportunity to pay off a house and never have ongoing housing costs (minus the $400 or so recurring) seems like a wise investment.

Yes it does and congratulations on your smart move.

This is certainly some good and encouraging news.

From Inman Real Estate News.

Mortgage application volume during the second week of January posted a huge increase as interest rates continued to decline, the Mortgage Bankers Association reported today.

The group’s market composite index, a measure of home loan application volume, climbed 28.4 percent on a seasonally adjusted basis between the first and second weeks of January. This double-digit gain comes on the heels of a 32.2 percent rise in the index one week earlier, the largest in four years.

And why are these applications up?

The 30-year fixed-rate average sank to 5.42 percent, and the 15-year fixed rate slipped to 4.95 percent. The 1-year adjustable rate was down at 5.26 percent.

Now is the time to buy folks. Now.

Everybody is talking about the Bank of America/ Countrywide deal, but what does it mean for you and me? Well obviously is good news for everybody, as is stated in this article.

Q: Does the deal represent a vote of confidence that will help stabilize the mortgage market?

Yes, according to Doug Duncan, chief economist of the Mortgage Bankers Association trade group in Washington, D.C.

The deal could soothe jittery Wall Street investors and reverse the crisis of confidence that caused lending standards to tighten dramatically this summer, he said. If so, risk premiums could drop, improving prices for consumers, he said.

I love it when the free market takes care of itself. While this really isn’t the type of website you will find a lot of opinion, let me say this. This economy is not going to tank because of this so called mortgage crisis. This economy and the people that make it work is much too strong. We have been blessed with an amazing amount of prosperity for the last 25 years. Sometimes we probably take that prosperity for granted. But I’ve got news for you, the next twenty-five have the potential to be just as prosperous or even more so.

My friend and fellow Realtor, Kathy Tyson has written a great post about how any type of market advice applies to the housing market.

I once attended a conference in which Wall Street whiz kid Peter Lynch spoke about the ups and downs of the market.

During his speech, Mr. Lynch said something that has stayed with me years later: You haven’t lost money in the stock market until you cash in your stocks for less than your purchase price. He said this in response to people who always comment that they’ve lost money when stocks dip, when actually they don’t lose anything because the market inevitably comes back.

I believe the same applies to the housing market. If you are a homeowner and home prices dip - as we’ve seen this year - you don’t lose money. Home prices will come back in a year or two or five.

Excellent analysis Kathy. People behave in such strange ways. When home prices were increasing at an unnatural rate, everybody thought it was a great time to buy property. Yet when prices came down and the media reported doom and gloom, people became afraid and held onto their money. Smart investors did just the opposite.

Folks, we are not in a crisis, but a short term adjustment. In the long term, real estate markets always go up. Having said that, regardless of whether prices are low or high, it should not affect your desire to move. The reason is simple, if prices are high, you will sell your home for a high price, as well as buy your next home for a high price. If they are low, you still get the low price on both ends. It always evens out. But if you are investing, interested in owning land, or simply a first time buyer, NOW is the time to buy. Not when the market is booming.

The following is a press release from the Greater Nashville Association of Realtors. While there was a significant decline in 2007, it was still the fourth best year on record for the greater Nashville Area. 

There were 2,109 home closings reported for the month of December, according to figures provided by the Greater Nashville Association of Realtors®. This represents a decrease of 32 percent from the 3,109 closings reported for the same period last year.

Fourth-quarter closings for the Greater Nashville area were 6,856, down 26 percent compared to the 9,307 closings reported for the same period as last year.

The total number of closings for 2007 in the Greater Nashville area was 34,221, down 14.5 percent compared to the 40,056 closings reported for the same period as last year, which  was a record year for home sales in the region.

“Ending the year as the fourth-best year on record is very encouraging considering the state of real estate in other parts of the country,” said Mandy Wachtler, 2008 President of the Greater Nashville Association of Realtors. “While our numbers are down compared to most recent years, it would be nearly impossible to keep up with that pace. We set a record for the number of homes sold for six consecutive years. The market was bound to normalize at some point, and it did last year.”

“We are hopeful that 2008 will start strong and continue on a steady pace throughout the year,” Wachtler added. “There seems to be considerable optimism among real estate professionals throughout the Greater Nashville area as the number of showings begins to increase.”

A comparison of sales by category for December is:

“Inventory levels increased in December compared to figures from the prior year, but the numbers are actually at the lowest level since last April, when our inventory was 20,129. It is typical for inventory to decrease at this time of year,” Wachtler said. “However, with more houses on the market, sellers should probably take extra steps to get their home in the best shape to sell. That is always a good idea, but particularly important based on current market conditions.”

From Reuters:

Over the next few months, existing-home sales are expected to hold fairly steady as indicated by pending sales activity, then rise later in the year and continue to improve in 2009, according to the latest forecast by the National Association of Realtors(R). Lawrence Yun, NAR chief economist, said there is a pull and tug exerting itself on the market. “On the one hand, we have a pent-up demand from the four million jobs added to our economy over the past two years of sales decline,” he said. “On the other, consumers continue to wait for additional signs of market stabilization. There are more people with financial capacity now than in 2005, but many are trying to market-time their purchase. As a result, the exact timing and the strength of a home sales recovery is a bit uncertain. A meaningful recovery in existing-home sales could occur as early as this spring, or it may be further delayed toward late 2008.”  continue reading article

There is a lot more in that very interesting article, but I especially liked this excerpt.

Existing-home sales for 2007 will probably total 5.66 million, the fifth highest on record, then edge up to 5.70 million this year and 5.91 million in 2009, compared with 6.48 million in 2006. Existing-home prices for 2007 are likely to be down 1.9 percent to a median of $217,600, hold even this year and then rise 3.1 percent in 2009 to $224,400.

In spite of what you hear in the media, last year was still the fifth highest year on record for existing home sales. One of these days I am going to start a news channel called the Positive News Network. We could certainly use one.

Here are a few things I have learned about making your home attractive to show to potential buyers.

1. Keep a few lights on and the curtains open when showing your home. Darkness is never good.

2. Keep your kitchen and bathroom extremely clean. Never leave towels or clothing laying around. Make up the beds and put the toys away. If you have a two year old like I do, this may not be easy.

3. Certain items may need to be put in storage somewhere or gotten rid of. When a Realtor says to get rid of clutter, don’t take it as an insult. Certain things just take up too much space. In fact, you should also clear out your closets when you get ready to sell your home.

4. I have been in some homes where soft music was playing and potpourri was burning. Plants are also a nice idea.

5. If you have indoor pets, you are at a disadvantage to begin with. But if you do have pets, it is best that they not be in the house when you intend for it to be shown. In any event, you should do whatever possible to get rid of pet odors.

6. This may seem trivial, but many buyer’s agents automatically check your unit’s air filter, or recommend that their clients do so. A dirty air filter tells a potential buyer that your house hasn’t been taken care of. In the least, you should make sure there isn’t any lint on the outside cover.

From Realtor.org:

Freddie Mac’s statistics show a decline in interest on 30-year fixed loans to 6.07 percent from 6.17 percent last week, while 15-year fixed rates slid to 5.68 percent from 5.79 percent.

Click here to read the whole article, which also mentions a reduction in interest on Adjustable Rates Mortgages, something you might want to stay away from with rates being as low as they are right now.