Market (mis)timing

More than half of folks who bought into the housing market in 2006 are now upside down, and in places like Las Vegas it's about nine out of ten -- if you want to take Zillow.com's automated home valuations at face value (see story).

Whether the numbers are spot on or not, the potential implications -- more foreclosure inventory as borrowers lose their motivation to keep up their mortgage payments -- are ominous.

Reports like these may alarm would-be bargain hunters who would otherwise be ready to jump back into the housing market, but are afraid to end up in the same boat. But every market is different, and it's likely many have already bottomed out or never tanked. What does it take to convince fence sitters that the (discarded) mantra of the National Association of Realtors ("It's a great time to buy") may actually be true?

Homethinking.com has launched an interesting site that helps realtors show clients how lenders behaved back in 2006, when many of the wildest excesses of the housing boom were in full swing. Mortgage.homethinking.com taps the Federal Reserve's Home Mortgage Disclosure Act (HMDA) database, showing the percentage of subprime loans, average loan size, loan-to-income ratio, and other statistics at the county level.

The site's not perfect (see story), but it's the kind of innovation that makes you wonder if the folks at the Fed are sorry they didn't think of it first -- especially given that the Fed has created some pretty nifty dynamic maps that show the recent performance of subprime and alt-A loans in a database maintained by FirstAmerican CoreLogic LoanPerformance (see previous post).

Risk indexes that take into account past price volatility and economic factors like unemployment are perhaps the most sophisticated tool for peering into the future. PMI Mortgage Insurance Co.publishes one of the most comprehensive indexes (see story on the most recent numbers from PMI).

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