When will the Housing Bust End?

Sub-Prime Mortgage Resets Have Peaked

The resetting of interest rates for sub-prime loans is the source of foreclosures and subsequent decline in home prices. The chart above shows sub-prime mortgage resets in gray. By December 2008, the number will drop to nearly zero.

By December, 2008, most of the sub-prime mortgages will have reset to market interest rates. Any homeowners who cannot afford market rates will be identified and be working their way through the short-sale or foreclosure process.

This does not mean that foreclosures will be a thing of the past, but does mean that the primary source of loan defaults will have worked it way through "the system".

What will this mean to homebuyers and investors?

It is entirely likely that inventories of homes for sale will continue to fall as they have for the past few months. Buyers will begin to hear news reports of falling inventories along with stories of improving pending sales figures. This will create a surge in home-buying activity, resulting in firming prices, and perhaps the first increases in median home prices since 2005.

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