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Now is Not a Good Time To Buy a House

By Collin Towers

Home prices have stabilized in some major cities, but are still down 35% nationally from the peak of the housing bubble in 2006. Household’s wealth has shrunk by $12 trillion since 2007.The subsequent collapse has wiped out $7 trillion of homeowners’ equity as 65% of homes lost value in 2009. Only 7% of homes retained their actual value. “Another 20% decline in housing prices is possible”, said David Rosenberg, a chief economist in Toronto. Using the S&P/Case-Shiller index as a guide, homes across the country could soon lose half of their value. That is if the index gets back to the 1999-2000 level, this will relate to another 50% down in home prices. Economic issues like rising unemployment and reduced income are the main catalysts for foreclosures. And consumer debt rose from an average of less than 80% of disposable income in 1990 to 129% in 2008. The effects of deflated assets, tighter credit, and costlier energy on the economy are already apparent. Fewer people are buying homes, and the ones they buy are smaller and less opulent. In 2008, the median size of a new home shrank for the first time in 13 years. I think this should be a good sign. Americans need to start cutting back. Housing is being artificially kept from crashing by the banks, which are all holding onto foreclosed properties, by keeping two sets of books. They are only releasing a small amount of inventory, since they do not want to flood the regional market with excess inventory. Hence, home prices will crash even further. And when those distressed properties come back on the market, they’re typically discounted to the tune of about $26,000 below market value. This creates fierce competition; sellers of non-distressed properties often feel compelled to lower prices to match homes across the street, or down the block, or in the neighborhood. The mortgage market meltdown, the steep rise in foreclosures, the decline of new home construction, falling home prices, and mounting job losses have all converged to make the recovery from the current real estate climate almost impossible. According to a report issued by CoreLogic, by the end of the first quarter of 2010 there were 11.2 million residential properties with negative equity. Those 11.2 million loans make up roughly 24% of all US mortgages. There are 20 million homeowners underwater on their mortgages and they will not be buying homes within the next couple of years. There are 35 million Americans unemployed and/or underemployed who will not be buying homes either. This knocks out 50% of the potential homebuyers. People who are looking to buy houses now are starting to realize that they will be worth half as much in a year or so. So the question to ask yourself – Is now a good time to buy or not? Based on all of my research I think renting is the way to go. To find out more on renting vs. buying read chapter 21: Misstatements about Home Ownership, of the TOWER REPORT for more detailed information on why renting is the way to go.

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Topics: Investing, Leases Leasing, Mortgages, Real Estate | No Comments »

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Article Citation
MLA Style Citation:
Towers, Collin "Now is Not a Good Time To Buy a House." Now is Not a Good Time To Buy a House. 21 Aug. 2010. uberarticles.com. 3 Aug 2014 <http://uberarticles.com/finance/mortgages/now-is-not-a-good-time-to-buy-a-house/>.

APA Style Citation:
Towers, C (2010, August 21). Now is Not a Good Time To Buy a House. Retrieved August 3, 2014, from http://uberarticles.com/finance/mortgages/now-is-not-a-good-time-to-buy-a-house/

Chicago Style Citation:
Towers, Collin "Now is Not a Good Time To Buy a House" uberarticles.com. http://uberarticles.com/finance/mortgages/now-is-not-a-good-time-to-buy-a-house/


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