As I write this, optimism is brewing with the stimulus bill just passed by Congress to be enacted into legislation by President Obama. While many economists question how much impact the bill will have, all agree that doing nothing would leave the country entirely crippled. As Treasury Secretary Timothy Geithner still wrestles with the trickier aspects of the floundering banking system, toxic assets, and the foreclosure flood, the housing industry has seen some gentle movement that perhaps signals that we will see a recovery after all.

Recent statistics published by The New York Times show an astonishing picture of the housing bubble that occurred between 2000 and 2006. Prices nearly doubled in six short years. The only other time in our housing history that home prices increased so greatly was in the aftermath of World War II. There is no doubt that when you look at home prices over the past 100 years, the notion of 10 percent appreciation per year is simply unsustainable; the correction is now upon us.

The good news is that New Mexico is one of 21 states that had no change in home values between January 2007 and January 2008. Some states, like California, Nevada, and Florida, saw values plummet as much as 39 percent. While we were enjoying record-high appreciation, lending practices changed dramatically. In data provided from the Milken Institute, the percentage of subprime lending nearly tripled between 2003 and 2005 and as many as 22 percent of all originated loans were subprime.

The troubling news is that there are still roughly another 15 percent of adjustable-rate mortgages due to reset over the next two years. These subprime loans account for the great majority of the foreclosures that are in the wings. The rate of foreclosures has increased by 10 percent locally, which is, despite an increase, good news for us. Not-so-good news for places like California and Nevada, where the foreclosure filings and mortgage delinquencies have increased by 100 percent and more.

Foreclosures usually represent an excellent opportunity to purchase real estate at bargain prices. So, to look at the upside, the sales of existing homes rose nationwide by 6.5 percent in December and the Pending Home Sales Index rose 5.2 percent from statistics by the National Association of Realtors.

While these increases do represent a good portion of foreclosure and distressed properties, they also represent 41 percent of first-time homebuyers who are now able to act in this new marketplace. Inventory levels as reported by USHousingUpdate.com shows most states have posted declines in inventory with only a few areas increasing modestly.

The United States is not the only nation feeling the pain of the housing crisis. Between the years of 2002 and 2006, New Zealand saw the greatest percentage change in home prices, increasing an astonishing 65 percent. Spain saw an increase of 52 percent in that same time period, while Denmark and France both saw an increase of 50 percent so our 44 percent increase doesn't seem quite so bad.

While the U.S. and many other countries were spiraling upward, Germany and Japan saw their home prices drop 10 to 15 percent. Bloomberg recently stated that the housing market lost $3.3 trillion dollars in value last year, but these numbers are so deceptive. The correction in home values must reset to equalize the unsubstantiated appreciation the country experienced for four straight years. This is a natural correction that has occurred throughout our history. The pain of the correction may be more severe; however, it is not unprecedented.

It is very easy to look at what happened and play the blame game. The increase in subprime lending coupled with the astronomical appreciation in home prices pushed this country to the brink. A home is not a commodity and the millions of dollars of equity that was cashed in and spent based upon fallacious appreciation constricted our economy. It's like a lesson I learned when I was 20 with my first credit card. It was so easy to charge it, charge everything in fact, until there was no more charging left, just a big balance that when compounded with interest never seemed to go away. And you know when you pay that off, you are wise not to do the same thing again. So, this country will get back on track and housing will bounce back. It may take more time, and patience is requisite, but optimism is the first sign of a recovery and this storm too shall pass.



Melissa Pippin-Carson is an associate broker with Sotheby's International Realty. Contact her at 984-5128 or mel@pipstips.com with your questions or suggestions.