U.S. housing market slowdown may be close to reaching a bottom

Since bottoming in mid-July, builder stocks are up over 20%.

Recent home starts are down 20%, which means builders are curtailing new inventory. Buyer demand has leveled off on a national basis, which has been moving sideways for several months now. The issue, however, is that inventory still remains high in many markets.

Homeowners who bought in recent years with an adjustable rate mortgage often are unable to refinance their houses because the bank wants the owners to account for the differences in the equity (since the housing prices have dropped). Since these owners don't have that difference, they decide to sell, Morgan says. In 99.999% of everyone I have spoken with, they cannot sell at a price to cover the mortgage