This just makes you shake your head....

New Home sales probably bottomed in mid-2010 and have flat lined since then.

Back in 2009, when I first wrote about the two bottoms, I thought we were close on housing starts and new home sales - but that it was "way too early to try to call the bottom in prices."  In real terms, house prices have fallen another 10% to 15% since I wrote that post according to the CoreLogic and Case-Shiller houseprice indexes.

And it now appears we can look for the bottom in prices.   My guess is that nominal houseprices, using the national repeat sales indexes and not seasonally adjusted, will bottom in March 2012.

CR is smoking crack.  You simply can't look at charts and determine anything in this regard, and here's why: Tax load.

I'll give you one example -- my former home in Deerfield, IL.

I sold it in 2000.  Today, it has gone up in "value" (according to various estimated sources) a fair bit from where I sold it.  Of course it was worth a hell of a lot more in the middle of the bubble, but that's immaterial.

What's material is the carrying cost and what you can rent a similar house for.

See, real estate taxes on that house are now (as of 2010, latest I have the assessment for) right near $21,000 a year.  And the estimated rent is $2,600 a month.

So renting the house would bring you $31,000 a year.  But of that only $10,000 is left after paying property taxes, or about $830 a month.  That doesn't even come close to paying the mortgage on the joint.

In fact you can't even get close to being able to cover a 2% Interest-only rolling note on the place with what's left of cash flow, and that assumes 100% occupancy and zero operating expenses, both of which are of course fanciful assumptions.  When interest rates go up in the future, of course, it simply makes it worse -- much worse.

In other words the house has a negative capitalized value at the present time.

Housing bottom?  Not a prayer in hell for areas like the Chicago suburbs, as there is no price at which these homes can change hands in an open market and yet pencil out due to the tax load.  At roughly $2,000/month in property taxes alone these homes are worth nothing -- and we're not talking about mansions here either.  Oh sure, it is a very nice (and pretty large) house, but it's not a mansion by any stretch of the imagination.

Until this problem is corrected, and there's no indication it will be, in major metropolitan markets there is no bottom because there is no capital value on these homes.  They are carrying tax burdens that are outrageous compared to their alleged "value" -- in most cases two to three times the tax burden that would result in a deal that "pencils out."

Further, what CR is missing (along with a lot of other people) is that our recent history (last 30ish years) with housing has all been bubble territory, just to different degrees, with monstrous federal government distortion propping up prices.

Those who are looking at charts and saying "this looks like a bottom" are making two serious errors.  Even if they assume that the federal bubble in housing can be maintained (and they're wrong in this belief, incidentally) they are also ignoring the fact that municipal governments on a near-universal basis built in cost escalations during the bubble years that have to come back out of the property tax model before any attempt at an actual housing recovery can take place.  This means real and immediate reform of employment and retirement costs for these municipalities, including teachers, firefighters and cops, and it cannot be confined to "future workers" coming into the system now for the future.