Now Is the Tiem to Buy

[Kimberly S.]

The following article was posted in CNN Fri Dec 2, 2010. I have to say as a casual observation, that in Warwick NY we are seeing an uptick and buyers walking into the office. Many are still sitting on the fence, but the activity is encouraging. I believe the report below to be dead on. But I also believe we are near the bottom - buy now.

CNN Reports:
House hunters are too scared to buy despite low prices
Despite some of the best home-buying conditions in years -- affordable prices, low interest rates and lots of choices -- fear of buying has infected the market.

It has paralyzed house hunters, making them unable to pull the trigger even on attractive deals. Some are worried about making the payments, while others are convinced they'll save even more if they wait.

It's perfectly natural that they should feel that way in the wake of the housing bust, said Lawrence Yun, the chief economist for the National Association of Realtors. "It's like when the stock market is crashing," he said. "People are waiting to see if deals will get better."

[J Scott]

Originally posted by Mitch Kronowit:

I've been thinking a great deal about this. Help me get my brain wrapped around this situation, because I probably have far more questions than answers here. Not all of those distressed homes will be vacant until the bank is ready to move forward on them. Many of the residents will continue to live mortgage free in "their" home for years in some cases, waiting to get tossed out. That makes for one less household out in the rental market. Not good, but better than the alternative below.

I *think* the rumor that David was referring to is that the bank is sitting on lots of REO (not foreclosure) property that hasn't been released to the market.

In other words, the families have already been kicked out of the house, the house has already failed to sell at auction, and now the bank has the deed back in their possession.

At this point, the houses are sitting vacant and the banks are not listing them, as they don't want to flood the market, which would increase supply and values would drop. Of course, as the houses sit, deferred maintenance, vandalism, water damage, etc occur, which will reduce values anyway.

If they were all thrown out over a short period of time, demand for rental property, and rents, would skyrocket as too many homes would be sitting vacant not available for anybody to reside in.

This is actually what's been happening in lots of areas of the country. Two things have resulted:

- Rental vacancy has decreased and market rent has increased (not in all places, but in many over the past year or two);

- People are doubling/tripling up, taking in roommates, moving back in with their parents, etc. So, the total number of houses needed to house our citizens is reduced.

But until unemployment decreases and these young adults find the jobs, income, and stability to buy or rent a home, I think many of them are going to remain "boomerang" kids and continue living with their parents, once again denying the rental market another household to service.

Unemployment improvements tend to lag economic rebound after a recession, so I wouldn't be surprised to see things like housing, retail, services, etc improve short-term, while unemployment stays relatively high.