Tess Vigeland: Hard to believe, but we are now five years removed from the peak of the housing bubble -- April '06. The most recent monthly snapshots say prices are still falling, which may be one reason home sales are up. Applications for mortgages are up, too. One year ago this week we broadcast an entire show about housing from Seattle, where the bust hadn't really hit... yet.
One of the people we talked to was Stan Humphries, the chief economist for Zillow.
And at the time he offered this prediction for the future of the real estate market.

Stan Humphries: I tend to think that from where we are right now, we're going to see bottom in home prices nationally sometime before the middle part of this year, so by June. After we hit bottom, we're going to see three, possibly five, years of very flat housing performance in the U.S.

Vigeland: And Stan Humphries joins us again to talk about the year that was. Welcome back.

Humphries: Glad to be back.

Vigeland: So what do you think about your statement from last year?

Humphries: Boy was I wrong there. Well, only wrong with part of it. Wrong on when we would bottom. I still hold to what's going to happen in the aftermath at the bottom, that it's going to be a very long period of time before we get back to normal appreciation rates. But in terms of timing the actual bottom, the market bottom has proven more elusive than I think most people expected.

Vigeland: You know, one of the things that you talked a lot about with us was the fact that at the time about a year ago, Seattle was still not seeing a real terrible crunch in its housing market, but you predicted that it was going to be, I guess, a lagging indicator. And that's happened, hasn't it?

Humphries: Yes. Unfortunately, it has. Seattle -- because it went into its housing recession about a year after the rest of the country -- last year we expected it to get worse, and in fact it has. Home values were down about 24 percent from peak when we talked last year, and now they're down almost 33 percent from peak. And in fact, I remember when we walked around Capitol Hill we were talking about how few foreclosures there were. In the Capitol Hill neighborhood of Seattle, you're still seeing less foreclosures than you are metro wide, but the rates of foreclosures, Seattle metro, have picked up a fair bit over the past year as well.

Vigeland: Are there other cities like Seattle that came to the housing bust late that you're now seeing it happening now?

Humphries: In general, the Northwest markets are prototypical examples of ones that came into the housing recession late. So that's Seattle, Portland, Spokane. Some of the Dallas markets came in a little bit later, but not as late as the Northwest markets.

Vigeland: Then does the fact that the housing bust seems to have now hit all over the country, does that that signal to us that perhaps we are out of the worst of it? I guess, given what happened in the last year, it's not safe to ask for a prediction, huh?

Humphries: Yeah, that's true. What really, I think, worked against us in terms of forecasting -- and still makes forecasting very hard -- these two key indicators that all economists look at have been pretty corrupted by external events: home sales and on the other hand, foreclosure transaction. Of course, home sales have been biased because of the federal home buyer tax credit, which was in effect for most of 2009 and half of 2010. And then the time series on foreclosures has been disrupted because of various moratoriums that existed in 2009 and then, of course, the robosigning controversies in the fall of 2010 also led to slowdowns in foreclosures. And those time series are very important for predicting what's going to happen in the future.

Vigeland: Well I know you live in Seattle, but can you give us any sunlight? Any good news happening in the housing market at all?

Humphries: Well, I think that on the one hand, we've certainly seen a reduction in demand in home sales after the tax credits came off, but I guess I've been somewhat optimistic about what we're seeing there, which is that at last we are getting a good look at underlying demand. And certainly that demand dropped off. We have seen very high depreciation rates nationally. But in February, we started to see a reduction in that depreciation rate. So homes are still falling, but they're falling at a lower rate. And I tend to think that now that the policy supports are out of the market, we're going to see fundamentals. The fundamentals have already reasserted themselves, and I think that that means a market bottom will be in the offing. Now I hesitate to -- given my miss last time I spoke with you -- right now our forecasts do call for a bottom later this year nationally or early part of next year. So that's late 2011 or early 2012. But they still do call for a considerable time after the bottom -- at least three years in most markets -- where you're not going to see much appreciation even after you've hit bottom.

Vigeland: All right. Stan Humphries is the chief economist for Zillow and we've been talking about how things are going there in Seattle and throughout the rest of the housing market one year since our housing special. Stan, thanks so much.

Humphries: Thanks Tess.