The Housing Market is Recovering? Not on Yer Life
Let’s start off the new year with some great data on the U.S. housing market and why it’s not recovering — even though the media, the real estate industry, lenders, homebuilders and other interested parties would like you to think it is. Let me quote from a few housing news blogs:
Housing Crash Data Point #1
First off, falling prices are not all bad. They obviously make housing more affordable. The bubble sent prices so high that people who refused to borrow recklessly couldn’t purchase a home. Every now and then, the prudent deserve a reward.
Housing Crash Data Point #2
The recovery in housing has been boosted by just about every artificial means you can imagine…. Of course it looks like the housing market has recovered! The question is what happens when some of these subsidies are taken away?
Housing Crash Data Point #3
Bottom line, put your down payment back in your pocket…. Prices are falling too fast to stop at the 2000 price levels so exercise some patience until the line finally bottoms and turns back upward. Beware of a possible second bubble if it turns up too soon. Hope is a terrible thing. But once prices have fallen to somewhere between the historical median and the Great Depression median then pull your money out of your pocket and buy your dream home at a bargain basement price.
What does all this mean? Don’t be fooled by all the talk of how housing is bottoming out. If you are in the market for a house (like I am), exercise patience.
January 1st, 2010 at 4:29 pm
At the rate you’re waiting, you can probably pick up a great deal at some 55+ retirement complex. Or better yet, start reading the obituary columns. Great deals there also. Once someone drops dead. Like eventually, all of us.
If you wanna house, go buy one and kut yer bitchin’. Do it. Time’s a wasting. It’ll never be the ‘right’ time. Ever.
January 2nd, 2010 at 10:40 am
Rhea, I don’t know what you pay for rent and not sure where you what to buy a house. I hear this every day from buyers about wanting to wait for the bottom. The problem is, the only way to know it is the bottom is when the prices start going back up. Now, guess what… you’ve missed the bottom. It’s exhausting to my ears hearing the media and armchair analysts speculating about when that will or won’t be… I’ve worked with a lot of first time home buyers this year. They all have the same concerns about whether or not it is the right time to buy. I try to get them to look at it as “Is it the right time to buy for me?’ Yes, it is important to look at the housing market overall and especially in the area you want to live. But, folks also need to look at their picture overall as well. For example: How much am I paying in rent? How much of a tax break will I get by owning vs renting (for one, you will be able to deduct the interest you pay on your mortgage each year). Figure out how much money that is each year while you are waiting to buy a house and see if it is worth waiting and speculating when you can get the best deal… Even if you buy a house now and the market dips a bit more, you can live in your house while you wait for the recovery (you can’t live in your stocks…). You wouldn’t be buying at the crazy top we were at a few years ago and, if your smart…. which you are… and not foolish like I myself was (buying cheap and refinancing and now in an upside down position) I believe you will eventually enjoy some equity. Sadly, one of the education points I share with my buyers is my own sad story of getting caught up in the re-fi frenzy a few years ago. I stress with my buyers to buy what they can afford and hold steady! Mortgage rates are at historic lows. You can bet when the market starts to climb again (which it always does) the mortgage rates will go with it.
Anyway, I’m rambling and haven’t had coffee yet. I am getting ready to go show houses to some first time buyers. We are looking at homes in a range up to $170K. In Rhode Island this translates as a 3 bed, 1 1/2 -2 bath home with a decent yard and a garage. Maybe you need some paint and pull up the carpets, have the floors done. If you want a better deal, how about buying a bank owned for under $100K. It is not a slam dunk and it takes time to weed through some of the junk that is out there but there are little gems and I, myself, have found a number of them last year. 8 first timers in homes. I see them often follow them all on facebook and they all seem quite happy to finally be in a home and not stressing about whether it is the right time or not. It was the right time for them.
Truly babbling now and hope this makes sense. You just hit a nerve this morning…
January 4th, 2010 at 1:24 pm
Dear Rhea,
Patience is good and waiting for the turbulence to calm a bit more is good. The question is and roll the dice or gaze into a crystal ball – when things calm – what happens with the housing market?
An old acquaintance who was a real estate attorney once said we would “never” see a housing market such as we did when it peaked on LI – another friend would have reminded them of “only fools say forever and only fools say never”. Such is the way of a roll of the dice.
One thing I came to appreciate (rather late in life) is that what we can afford and then cannot afford – can be sold or rented. It comes down to weighing the odds and how much of a loss can one absorb (if it came down to that).
Way to go Lorraine in sharing the wealth of info – yet, one “ingredient” missing is the famous real estate jingle – Location – Location – Location! And within my circle of family, friends and acquaintances, I’ve seen houses that sell within a month with a minimal less of asking price – another house with a desirable location (voted as a #1 place to live) sit on the market. A local house which added a brand new porch – fancy schmancy front door – now has three realtor signs hanging on the front lawn. Many open houses – many balloons – one year later – it sits while a house around the corner sells within a week! (Note: No outside improvements – perhaps the “staging” was perfect)
I sense the answers as well as the results are and would be as individual as our thumb prints
January 6th, 2010 at 10:33 am
Linda, Ah yes…. Location, Location, Location! However, it is also Price, Price, Price. In the market I work in (Providence, RI and surrounding areas) I am finding location to be somewhat important but buyers are open to looking at a wide variety of locations. Right now, if a house isn’t selling it is most likely PRICE! Some sellers are still hanging on to the market of yesteryear and are unwilling to price their property so it will move. The danger in this is that they will chase the market down and wind up with even less by holding out for a higher price. Pricing a property “right” to begin with is crucial in getting a place sold quickly. Of course, location, condition, terms, play in to this.
January 7th, 2010 at 2:18 pm
I wouldn’t buy a house right now. Housing is still way overpriced, especially in markets like Boston and the San Francisco Bay Area.
January 10th, 2010 at 6:50 pm
I’m doing a story on the cause of the great depression and your blog is really alot of help, but Im trying to find even more specific info. I found this article cause of the great depression but I’m not sure I believe the ‘official’ story… I’m trying to find the ACTUAL cause of the great depression, if you have any sources of some other alternative sources for info please hit me back.take care