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已有 85676 次阅读 2009-03-01 01:53Five reasons not to buy a home this year Homes are more affordable, but don't rush -- prices won't skyrocket soon
This story originally published Feb. 6 has been updated to reflect the passage of the economic stimulus bill.
CHICAGO
(MarketWatch) -- The unemployment rate is creeping up and home prices
keep falling: Two great reasons why it might be best to put your home
buying plans on hold.
After all, your own job could be the next on the chopping block. Plus,
why not wait until home prices have reached their bottom and you can
safely buy knowing your new house won't depreciate like a car coasting
out of the dealership?
"It may be 2010 or 2011 before the general public believes it's safe to
go back into housing," said Steve Fifield, president of Chicago-based
Fifield Companies, a firm that builds condominium, apartment, and
office buildings. "You don't want to be the first guy to go back in."
Keep in mind, for some Americans buying won't even be an option due to
stricter mortgage underwriting standards that require bigger down
payments and higher credit scores.
But if you think you might qualify and you're tempted to test the
market, consider these five reasons for staying on the sidelines
instead:
1. Prices are still dropping
Data shows that prices are still dropping in many markets. If you buy
today, your home could be worth less in a year or even two.
"People don't like to buy depreciating assets," said David Berson,
chief economist for The PMI Group. According to PMI's most recent U.S.
Market Risk Index, reported last month, the risk of lower prices two
years from now has increased across the country. Half of the country's
50 largest cities had an elevated or high probability of seeing lower
house prices by the end of the third quarter of 2010, compared with the
third quarter of 2008.
Other home price measures haven't painted a rosy picture either.
According to the Case-Shiller home price index, values in 20 major U.S.
cities fell 18.5% in December, compared with December 2007. Read more on the record drop in home prices.
Steep discounts in some of the hardest hit housing markets have some
people wondering if prices could be starting to bottom. But some
markets saw price drops later on than others -- and it could take
longer for those latecomers to improve, Fifield said.
2. This sale will be on for a while
From a pure investment standpoint, you'd probably be better off
investing in stocks, said Nancy Flint-Budde, a Salem, N.Y.-based
certified financial planner. In a normal market, real estate
appreciates about 5% a year, she said. But even if prices stop falling
this year, as Moody's Economy.com is predicting, price appreciation
could be weak for a while.
In fact, while some recoveries resemble a "V"-shaped pattern, this
housing recovery could look like an "L" -- once a bottom hits, prices
will flat line, said Jay Papasan, one of the authors of the book "Your
First Home." Prices likely won't rocket to housing-boom levels soon, as
conditions are exacerbated by rising unemployment and foreclosure
inventory.
The lesson: This housing sale could go on for a while, so there is no need to rush.
"Even if in December of 2009 the first stories appear that sellers
aren't lowering prices any more... you need that uptick and information
showing that not only are sales increasing, but prices have stabilized
and are starting to go up," Fifield said.
3. You may not stay put
If prices continue to drop, you might have to be in that home for
longer than you thought in order for the investment to make financial
sense.
In any market, it's best to buy a home with the intention of staying
there five to 10 years, said Flint-Budde. This guideline is even more
important today, when you might have to absorb more price drops and
weather a couple years of slow price growth.
Brian Rayhack, for example, is renting an apartment in
Chicago because he's just not sure how long he'd be living in the city.
"If I was going to be here more than five years I definitely would have
bought," he said. For the flexibility that comes with renting, it's was
worth it for him to wait.
4. Your job could be the next to go
Maybe you're spooked by the headlines of job cuts. Perhaps you have
friends who have recently been laid off. If you think your own job
might is in danger, stop right there -- and stay put.
But even if you're comfortable with your own job security, investigate how your future neighbors are faring.
Your real-estate agent will tell you to pay attention to local market
conditions instead of national trends. But don't stop by only looking
at neighborhood home prices; the health of the local job market is also
important to consider.
Have there been many layoffs in the area recently? What are the largest
employers, and are they in industries that are suffering severely? Is
the local economy diversified?
"What is the state of the job market in my area, and my metro area in
general? That's going to impact overall demand," said Richard Moody,
chief economist with Mission Residential. At the very least, get a
sense of what the local inventory situation is like, relative to
demand, to anticipate the pressures on prices over the coming months or
years, he added.
It's best to get a broad picture of the housing market, rather than
simply asking yourself "can I afford it or not," Moody said.
5. Your cash reserves will be eaten up
Given the recession and the fragile economy today, even if you feel
confident about your job it's wise to have a cushion to land on in the
event you get hit with a financial broadside, a divorce or a major
health bill, for instance. If your down payment would deplete your
rainy day fund, keep saving for a while before house hunting.
"Even if you feel like you're secure in your job, it's much smarter to
have five or six months of expenses to have aside. A reserve is a wise
thing in this economy today," Papasan said.
If you haven't owned a home in the past three years, you may be
eligible for an $8,000 tax credit to buy a home. The money does not
have to be paid back, if you live in the home for at least 36 months.
But that credit is only available to first-time buyers. And even those
who are eligible might have had their hopes up for a bigger incentive
-- the $8,000 is a far cry from the $15,000 credit considered in one of
the versions of the stimulus bill.
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