I'm going to do it! I'm calling a bottom!

You can tell me I'm crazy. And, I won't entirely disagree. Bottoms are unknowable when you're there. You know it's the bottom after the fact when the statistics confirm it. So, anyone who tells you this is the bottom is, at best, guessing.

And, I will admit that this is an educated guess. But I look relentlessly at the numbers, day in and day out. I watch for trends. I study this stuff as though I was prepping for a final exam.

And, everything I see makes me believe we're at a bottom here. In places like Prince William I think it's clear we've already passed the bottom and all those people who are still waiting had best hurry up! Prices are already starting to rise.

In places like Fauquier and Culpeper it's much less obvious. There's still too much inventory and we have a ways to go to get to "normal". But the trend is solidly in the right direction. Even now, at the end of March when there should be tons of new inventory coming online for the spring market, inventory is still dropping. But new buyers are coming out.

Let me add one note and one caveat.

This is a sales bottom. I don't believe we'll see sales numbers fall from here, other than the seasonal dips we would ordinarily see. This is not a price bottom everywhere. In Prince William I believe prices have bottomed as well. I think you'll see small appreciation in Prince William this year.

In Faquier and Culpeper I believe you're still looking at a very small downward adjustment this year, perhaps flat if we get very lucky.  And we will not bounce off the bottom quickly. Expect relatively flat prices next year as well.

And, the caveat is, this assumes that we are not, in fact, entering another Great Depression. It assumes that the recession lingers through much of this year but that there is some recovery in 2010.

And, if the plan Republicans are introducing today for a $15,000 tax credit should become law, we could even see more price appreciation than I'm currently predicting. A note that this new tax credit is predicated on the buyer being able to put 5% down on the house.

Happy bottom!

I always enjoy hearing Robert Toll, CEO of Toll Brothers, on his quarterly conference calls. He's always refreshingly honest and will undoubtedly make me laugh out loud at some point during the call. And the one this week was no exception.

"With respect to traffic, it’s still dismal. Traffic is -- it’s consistent, however. It has not gotten any worse for the last three quarters, so we feel as though we’ve stabilized but I don’t want to give you the indication that that makes us feel good. It’s as though we walked into the tar pits, sunk up to our nose, our feet are touching a ledge and we are not going down any further but that sure doesn’t make us feel that comfortable...But we are heartened that at least we are able to spook up the traffic. That indicates that there are buyers out there waiting to be nudged. It will take a general turn in confidence for the big nudge to occur but sooner or later, it will occur."

 He's hit the nail on the head as far as traffic goes. Here's a chart that illustrates this at a local level for Prince William County:

There is still a huge gap between where inventory is and the number of sales. And this is after a huge jump in sales in Prince William recently. If you look at nearby counties the discrepancy is often even more jarring.

Unfortunately, there aren't any charts that give us foot traffic statistics. But this clearly illustrates the dilemna for the market. Excess supply in a free market economy inevitably pushes down prices. As long as this gap is as large as it is currently, there's no sign of a bottom from a price perspective.

It's a good thing Robert Toll has a good sense of humor!