I called a "bottom" last year in January, and subsequently bought a home in Ohio. I relocated this spring, and called a new "bottom" when I sold my house in Ohio. Timing is everything, and mine was rather poor. Still, priced right, houses will sell. Mine was on the market for about 3 months, which was pretty good for Northern Ohio right now. It's a bit of a depressed area compared to here in Tennessee.
One of these days, such people will be right, simply because housing prices won’t go to zero, but to call a bottom now ignores the wave of Option-ARM loans which are just starting to reset.
Just to note - not all ARM loans are bad credit risks. People have been using them for years. It's just the recent few years of relaxed requirements and ultra-low interest rates have brought the deadbeats into the housing market. I believe that you're right in that banks are actually starting to clamp down on poor lending practices. It's something that they should never have given up, regardless of the political pressure from the left (and yes, there was significant pressure to lend to high-risk borrowers over the last decade or so).
You’re right that not all ARM loans (or rather, the people taking them out) are bad credit risks.
However.... far, far, far too many ARM products (whether we’re talking Option ARM, interest-only, sub-prime ARM, etc) were used by the real estate marketing machine to shoehorn people into housing far, far, far above the historic norms for what people should be allowed to buy.
Here’s the background (very quickly): In the “big picture,” mortgage lenders used to allow you to take out a mortgage that was between 2.6 to 3.0 times your household income - that would be all incomes in a household combined, husband, wife, Heather’s two mommies, whatever.
In many places in California, in 2005, 2006 and even early 2007, new-fangled mortgages were being written for amounts that were 4, 5 and 6 times household income. These are aggregates I’m talking about across regions - eg, San Diego, Orange County, LA, the Bay area, etc.
There’s no way out of this for people, even people with good credit. Absent their ability to suddenly make a whole lot more money, they’ve been sold into financial servitude by their lenders with these notes.
What lenders have to do is learn how to say “No.” As in “No, Mr. and Mrs. Smith, we can’t give you a mortgage, any mortgage, on that amount of money because your combined household income is only $100K, and you’re trying to buy a house that costs $800K with only $100K down. The numbers don’t work and won’t work until you have a combined household income of $200K and another $100K down.”
That’s what needs to be said.