Tuesday, 03.25.08
Buyer's Market
David McNew/Getty Images
There Goes the Neighborhood
January/February 2008
In exurbs and fringe cities, the mortage crisis is having a domino effect, Matt Yglesias reports.
Housebound
December 2007
The National Association of Realtors has suggested that the improvement shows a stabilizing market. But as traders like to say, even a dead cat will bounce if you drop it from high enough. As of February the median home price had fallen by 8.2% year-on-year, the largest decline on record. Of course a few bargain-hunters have ventured back into the fray.
Anyone tempted by the NAR's style of rose-colored reportage should note that the fall in prices is driven partly by foreclosures. The share of lender-owned homes is rising steadily, and some lenders have finally given up waiting for the market to stabilize. They are still buying up inventory faster than they can sell it off. Analysts predict as much as 20% of all home resales this year will be foreclosure sales. Until that inventory is cleared -- unlikely until well after the last of the bubble loans reset -- the market seems unlikely to recover.
House prices may have further still to fall. Prices remain above historical norms, and the ratio of rents to house prices still makes buying a very bad deal in many areas. Now that people can no longer expect brisk annual appreciation, house prices need to drop further to bring them back into line. This process is being eased by inflation, which erodes home prices (and loan values) without forcing homeowners to take the psychologically difficult step of selling for less than they paid. But it will take a while yet.
So what are would-be homeowners to do? The same thing they should always have been doing: buy a home because they want to live in it and because it fits their budget, not as a substitute for an investment. If you live in an area where that's possible, go ahead and buy. If not, well, sit back and enjoy your bargain rental.
Experts reactThe Wall Street Journal collects the reaction of economists to the housing news. |
The long haulGene Epstein writes that "the nationwide slump in home prices could last for a long, long time -- especially if you count the toll exacted by inflation." |
On mortgages and bailoutsDavid Brooks says the housing crisis is "the most underdiscussed issue of this presidential campaign." |
