About the best thing, and it is not a small matter, that can be said for the U.S. housing market is that many of the key indicators have moved a long way in the right direction to where recovery can begin. Yes, there are still problems in financial markets. The banks are writing off their assets at an astonishing rate, with perhaps more sharp adjustments to come. And Fannie Mae and Freddie Mac have required explicit (as opposed to implicit) government backing to ensure that they can still borrow enough money to keep mortgage availability liquid and reasonably priced.

However, housing starts have probably flattened out at the bottom. New "single-family homes sold" has stayed constant at about 530,000 units for the past four months. The number of unsold new homes has fallen back from a peak of 573,000 units in July 2006 to 426,000 now (please see graph below), which harkens back to levels in late 2004. Finally, the number-of-months inventory of unsold homes has dropped to 10.0 from 11.2 three months ago. Any increase in sales will translate quickly into a lowering of this rate.

Case Shiller Existing Home Price Declines
Furthermore, home prices have clearly adjusted to levels that should begin sparking more interest. Case Shiller's 10-city composite price index for existing homes was -16.9% in May 2008, versus May 2007. The 20-city composite index was -15.8%. The cities with the largest existing-home price drops were: Las Vegas (-28.4%); Miami (-28.3%); Phoenix (-26.5%); Los Angeles (-24.5%); San Diego (-23.2%); San Francisco (-22.9%); and Tampa (-20.2%). A few cities have had year-over-year price declines of about 5% or less: Charlotte (-0.2%); Dallas (-3.1%); Denver (-4.8%); and Portland (-5.2%). None of the 20 cities monitored escaped without a home price decline of some sort.

Bargain Days for Foreigners Wanting U.S. Property
Finally, a few comments are warranted on foreign demand for U.S. housing. For example, anecdotal evidence suggests a significant pickup in Canadian citizens buying property in Florida, Arizona and ski country. Certainly, from an economic standpoint, such purchases make sense. These are bargain days for American property as far as many foreigners − Europeans, Canadians and Australians − are concerned. The two primary factors are: (1) the home price declines as noted above: and (2) major currency shifts, due to U.S. dollar declines over the past five years, that have further lowered U.S. prices for people from outside the country.