Â I know many of us have been thinking this for some time now, but when the
news media starts saying it â€“ well, I guess that makes people stand up
and take notice. A number of recent articles in the national press are
now saying that it might be the right time for consumers, who have
largely been on the sidelines, to jump back into the housing market.
understand why potential buyers, whether first-timers or move-up
buyers, remain cautious given all the economic headwinds and bad news
out there. Economic growth has been slow, the jobless rate too high, and
donâ€™t even get me started about the politics in Washington, the
euro-zone debt problems and the challenges facing Greece.
I often urge buyers to determine what I like to call your â€œpersonal
economy.â€ That is, if you have a steady job, reasonable credit, and
enough savings for a solid down payment, you might want to take a deep
breath and think about taking the leap into the housing market while
prices and interest rates are so low.
Read what two of the nationâ€™s top business publications, Fortune magazine and The Wall Street Journal, are telling their readers:
stocks. Don't bet on gold. After four years of plunging home prices,
the most attractive asset class in America is housing.â€
- â€œReal estate: Itâ€™s time to buy again,â€ Fortune Magazine article by Shawn Tully.
key measures now suggest it's an excellent time to buy a house, either
to live in for the long term or for investment income.â€
- â€œItâ€™s Time to Buy that House,â€ The Wall Street Journal article by Jack Hough.
Tully in the Fortune
piece interviewed Mike Castleman, founder and CEO of Metrostudy, who
has spent more than 30 years tracking data on the inventory of new homes
in the United States. Each quarter, inspectors go through 45,000
subdivisions from California to Maryland. According to Fortune, inspectors examine 5 million lots and record whether they contain a house under construction or completed.
has Castleman observed? The glut of new homes that the U.S. had a few
years ago at the peak of the market has rapidly disappeared. Instead,
he told Tully that he has seen a rapidly declining inventory that could
force prices higher. In the 41 cities Metrostudy looked at, there are
just 78,000 houses vacant and for sale, or under construction â€“ less
than a quarter 343,000 units at the height of the market in 2006 and
less than the total a decade ago.
"The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses,â€ Fortune quoted Castleman as saying. â€œAnd in most markets the price of new homes is fixin' to rise, not fall."
collects figures on the number of homes that are vacant and for sale in
each city, and the number of months it takes to sell all them to
determine whether individual markets have a surplus or a shortage of
homes. "If we had anything like normal levels of buying, those houses
would sell in 2Â½ months," Castleman told Fortune. "We'd see an
incredible shortage. And that's where we're heading."
says that consumers may be confused by conflicting news reports on the
housing market, and that could be impacting their confidence in buying a
home. On one hand, housing affordability has never been better. But on
the other hand, they continue to see housing starts falling and home
prices still heading down in some markets.
said economists Robert Shiller and Karl Case, authors of the
S&P/Case-Shiller Home Price indices, have different views about
where we ware in the cycle. While Shiller remains pessimistic, Case is
more optimistic that things are starting to turn around, telling Fortune that "the lack of new home building is a huge help that a lot of people are ignoring.â€
In its analysis of the housing market, Fortune
noted that itâ€™s important to look at the economic fundamentals of home
ownership to see where the market is headed. As home prices rose sharply
over the past decade, Tully said the magazine warned that a bubble was
forming due to the level of new construction and the cost of owning a
home compared to renting one.
reality set in, and prices plummeted,â€ Tully said. â€œOur current view
focuses on those same fundamentals â€” only now they're pointing in the
opposite direction,â€ Fortune noted. â€œSo let's state it simply and forcibly: Housing is back.â€
article said what will drive the recovery of the housing market is a
sharp drop in new home construction, as noted in the Metrostudy
research, as well as a big drop in home prices. Home prices have fallen
about 30% nationwide since 2006, Fortune said, and more than 50 percent
in hardest hit markets. With unusually high affordability levels, the
article noted, Americans will start returning to the market.
no one can predict with certainty the future of home prices and sales
volume, it is safe to say that a turnaround will eventually happen.
Timing the market is very difficult because you will never know the
absolute bottom until prices have started going back up again. My advice
is to look closely at your own â€œpersonal economyâ€ and talk with a
professional Realtor to see if now might be a good time for you to take
advantage of low prices and rates, and join others in taking the plunge
into buying a home.