Is Now a Good Time to Buy a Home?

By JUNE FLETCHER Article Comments more in Real Estate Main » Email Printer Friendly Share: Yahoo Buzz facebook MySpace Digg Seen This? del.icio.us NewsVine Google Reddit StumbleUpon Mixx Text Size Q: Given what's happening in the financial markets, is now a good time to buy a home? A: For some people, yes. If you… have access to credit have fat cash reserves aren't already over-exposed to real estate have a secure job or income stream expect to hold the property for at least two years …then now is an excellent time to buy. Everyone else should take a breather. The reason: It's still too early to tell whether the dire predictions many government officials and economists are making about the potential collapse of our economy without a bailout are crying wolf--or if the wolf is really at our door. For those who are cash-rich, either because they are too wealthy to be badly hurt by any economic swing, or because they were presciently pessimistic and liquidated their portfolios before the meltdown, the coming months—and perhaps years-- of uncertainly will provide an unprecedented real estate buying opportunity, of both trophy estates and income-producing investment properties. "The smart people know that the world is not coming to an end," says Lanse Robb, an agent with LandVest, a brokerage on Boston's toney North Shore. "They're making their moves." But the average buyer probably doesn't have the cash to gamble on real estate--and shouldn't, at least for now. Income growth has stalled for the vast majority of Americans for the past eight years, and home equity has been vanishing rapidly since the peak of the boom in 2005. (Last month, median existing home prices nationwide fell 6%, to $221,900.) The roiling stock market is hardly a comfort either, as everyone who has peeked at a 401k statement over the past week knows. More critically, jobs are evaporating at an alarming pace. According to government statistics, the unemployment rate rose to a five-year high of 6.1% in August. There have been eight consecutive months of job losses, with a year-to-date total of 685,000. And layoffs aren't likely to end soon, since factory orders fell 4.5% last month—twice the rate that analysts expected. Without healthy job growth, it's likely that the supply of unsold homes will grow. Currently it's at 11 months, more than double the median supply of two years ago. Until that inventory is burned off, home prices will continue to stagnate or fall in most markets. A government bailout that unfreezes credit markets and staunches the flood of foreclosures that are also depressing prices should help, but the fix will take a long time. That doesn't mean that the housing market is doomed; ultimately, it will get better. There's even an upside: certain markets, particularly on both coasts, were driven up by speculators and became wildly overpriced during the boom. Falling prices means that housing in those markets will eventually become more affordable for average families. Credit Suisse estimates that, nationally, the ratio of median home prices to household incomes will return to their historical average of 2.86 in another 18 months. In the meantime, if you're feeling insecure about your job or low on cash, hang tight and save your money. And if you must move, rent.