Buy houses at bottom?

The most heated debate now is whether the housing market has bottomed out. Media has propagated that housing indexes and prices have stabilized in the first half of 2012. That is Indicator #1 that the housing market is bottom. In addition to price, record low mortgage rate fuels appetite to catch the incentive before it is gone. This is Indicator #2 that the housing market would be heading up. Both of these are buy signals.

However, people aren't easily be fooled by media and banks after the subprime case. Here is a list of factors that may affect purchasing decisions:

• National wide, the housing market is still a buyer's market with a few exceptions that prices have appreciated such as the Bay Area, New York City, and AZ. So there are signs of life of recovery. But house prices aren't as volatile as stock market. It will move slowly with clear trend. The trend now is indeed at the bottom.
• The driving force pulling up house prices is the lowest mortgage rate. It is true that in many regions baby boomers need to use their house to finance retirements. It is also true that in other regions baby boomers are cash fluent to buy investment housing for next generations. Either way, baby boomers are a strong factor to prevent prices falling further. 
• Rental market has gone up to a high level because of foreclosures. Shrewd investors have noticed that banks are manipulating their foreclosure and short sell properties to wait for a higher price. A simple delaying tactic. The inventory may still take a while to melt. So banks don't want to see prices drops further. With strong revenue in the reports, banks seem have time on their side for this tactic.
• Given the historic low mortgage rate, if Fed increases rates back to 3% in 2014 gradually, house prices will come down again. It is impossible to keep printing money for free forever. That translates to a 2-year honeymoon period if purchasing a house now. After that, buyers would need to wait for the next housing bubble or inflation. This is a long time.
• Real estate tax is another important factor. About 40 to 60% real estate tax goes into public education. So if there is a budget deficit in where you are considering buying, think about the worst case what would happen to your RE taxes. When your house suddenly has a high appraisal, you would pay more taxes. 
• In some locations, rentals are hot and valuations are more resilient than others. These are good signs that even when interest rates go up, prices won't drop too significant or not dropping at all. Of course, houses are hard to find too. But it is not impossible.
• Banks are cautious on lending. They don't want to see regional house prices more than 3-3.5 to household income, in general. Therefore, from regional median housing prices, you can actually calculate household income in that area. Then you can use the unemployment rate in the area to forecast (with safety buffers) how the housing price would fluctuate.

So in the coming 2-year, housing is at a bottom. For buying, it needs great due diligence. There are opportunities.