Too soon to look for housing market bottom

Tuesday also brought fresh data showing that consumers are getting more anxious about the economy. The Conference Board’s consumer confidence index “fell out of bed with a loud thud,” dropping to its lowest level since 1973, according to Brain Bethune, an economist with Global Insight, an economist forecasting firm.

Most worrisome is that consumers are getting gloomier about their job prospects.

“We’ve had no job growth in the last three months, and March could be the fourth straight month,” said Ken Goldstein, a Conference Board economist. “That's exactly what consumers were worried about. That's why these numbers are down and have come down so much, and it also why it’s going to take a good while before we start to see these numbers  improve.”

The housing industry has also been encouraged by a recent easing in mortgage interest rates, but analysts say ongoing turmoil in the financial market could keep those rates from falling much further.

“I think we are at least two or three months from a sense of (the housing market) going up, and longer than that, maybe six months, for real confirmation at best,” said Blitzer. “There are plenty of people out there, including S&P’s economists, who think we are probably looking at another year before there's a real bottom.”

There’s also concern among some analysts that the recession in residential housing could spread to the commercial real estate market, which has held up relatively well so far.

With prices falling, some condo owners have turned them into rental units. Condo sales perked up a bit last month, but the level of unsold inventory rose to a 13 month’s supply. As those condos hit the rental market, owners of commercial apartment buildings are feeling the impact, according to Sam Chandan, chief economist at Ries, Inc., a real estate research firm.

“It’s undermined occupancy levels in a lot of the southern U.S. markets to a significant degree,” he said. “Even though we're seeing stronger demand for apartments, people are nervous about buying homes when there is the potential for prices to fall further."

Chandan said there are other troubling signs that the commercial real estate market could be in trouble. High levels of consumer debt — along with a drop in consumer confidence — could spell trouble ahead for retailers, forcing them to close some of their stores.

“We also have more retail development in the pipeline than we've seen in over a decade,” he said. “And there’s some concern about whether or not consumers can grow their spending in the next couple of years in the way we’ve experienced in the housing boom.”

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