Devoted to understanding the basics and fundamentals of investing

The economy in the last couple quarters has been very changeable, with some parts of the economy showing strength and some areas experiencing severe downturns. The poster child of the weakest part of the economy has been the housing market, and deservedly so. Will 2008 be the year it turns around, or has the previous weakness just been the beginning of even worse things to come?

If you look at the recent housing data, there is absolutely no sign of the slowdown coming to an end anytime. In fact, it seems that things are actually pointing toward an even more sharp decline ahead. The November 2007 data, which was just released December 28th, showed that new home sales fell to their lowest level in twelve years. From November 06 to November 07, the pace of new home sales slowed by a staggering 33%. Probably the most worrisome data though was the 9.3 months of supply of new homes that is now built into the market.

The key in 2008 will be to watch the employment reports. If the jobs situation gets worse in a hurry, expect the bottom to fall out of the housing market in an even bigger way. The data from yesterday's employment report is making that look like a bigger possibility by the day. Even if the employment market holds up well, I sincerely doubt that 2008 will be a turnaround year for the housing market. This is a simple economic problem, there is far too much supply and not nearly enough demand.

So what should homeowners and prospective buyers do? If you are a homeowner who wishes to sell your home at some point, but want to maximize your profit at the same time, please do not sell your home in 2008. Your home will simply be put out into the huge supply and get lost in the shuffle, with very little demand to meet that tremendous supply of houses. If you are a prospective buyer, I truly believe that there will be an even better price than today for you. As the economy weakens, home prices are likely to drop even farther. 2009 may well be the better time to purchase a new home rather than 2008, but only time will tell. Obviously if you have to buy a new home, then searching around for nice areas that have slashed prices of late would be wise.

The housing market has already been called a bubble by many people, and the data is starting to show just that. If the employment picture turns south in 2008, look out below!