June Fletcher of the Wall Street Journal weighs in today on whether it’s a good time to buy a home. My answer isn’t quite like hers–I say wait until the financial market meltdown settles out and take another look and prepare now by reading SELLING FAST, a great book if you want to sell your home NOW or later.
But she says, sure for some it’s a great time, especially if you have money stashed away. Oh, really?
I may differ to a large degree, but let’s hear her out:
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 above five bullet points almost eliminate everyone. Who in this dizzy market today has a “fat cash reserve and isn’t already over-exposed to real estate?”
A lot of people are stuck. They bought at the height of the market frenzy and suddenly the bottom fell out. Then they lowered their price to sell and the market kept falling. They couldn’t react fast enough so they are left with two houses on their hands. Or, in many cases, they have already lost the speculation house or will shortly. How can the average American make two simultaneous house payments? And most of those second houses were bought on ARMs, meaning their interest rate and monthly payment has probably doubled since they bought and they are “stuck.”
Continue with June Fletcher:
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.
Now you’re talking. Most of those reading this blog fit smack-dab in the middle of Mr. and Mrs. Average American. Right? So sit tight if you can until the market debacle in Washington clarifies. And that could be soon.
Or it may not be soon. There is now a real difference of opinion in the halls of Congress as to whether the “sky is falling in” or not. There are a lot of members of the House of Representatives–both Republicans and some Democrats–who have voted as late as today, September 30th, 2008 against a bailout. Now their talking Newt Gringrich talk. He advocates that we not bail out the stock market or anyone. That we merely let the market adjust, which I think is wise. There isn’t a run on any banks that I know of. Things are moving along just fine, to listen to the bankers.
Read my last blog in AngstBlogger. (“Bush Should Fire Hank Paulson Today!) It came from Family Matters and is well enough documented. There won’t be a bailout. Maybe there will be a “workout” where the American taxpayer loans Wall Street some money, but it certainly won’t be $700 billion. That number was fabricated by Hank Paulson by taking the percentage of people in America who had foreclosed homes–which is 5%–and multiplying that by the Gross National Product or some such number. So it’s totally a bogus number to start with. An estimate at best.
Shame on you Hank Paulson for messing with our minds. Shame on you for giving President Bush and Congress bad advice. And shame on you, too, Ben Bernanke, for being complicit in this whole ruse. It smells to high heaven and some heads should fall starting with Barney Frank’s, a blowhard congressman with a strange New York accent who jumped right into this mess with both feet.
In fact I think Barney Frank caused it. His insistence, and Charley Rangle’s, that America was being racist because blacks couldn’t afford houses under the regular Fanny Mae and Freddy Mac regulations did cause Congress and the president to loosen loan requirements. That is documented. That’s what started this mess. Barney, hand in your badge to the House and go home and hide your face.
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.
Even with that, McCain was right. The American economy is not moribund. It is sort of robust and will rally if we leave it alone. Don’t listen to Wall Street. They’re all a bunch of losers–many of them have the socialistic idea that government should pay so they can play–and they want to suck the American taxpayer into their morose.
But June Fletcher would have us believe the sky is really falling in. She reports that “. . . 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.”
Imagine that? Under Jimmy Carter we had higher unemployment than that with inflation nearing 20 percent and we didn’t cave.
But Mr. White, she says, “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.
My reaction. “Yes, Dear, and if you elect Obama expect job losses to soar even higher. That’s because he wants to saddle business with higher taxes when America has the second highest business taxes, 35 percent, in the world. Ireland has the lowest at 11 percent and what is to stop US companies from moving offshore if they can become more profitable. Absolutely nothing. Then let’s see who’s hollering about US job losses. They’ll be yelling “Impeachment” for Barak Obama because he didn’t listen to the conservatives. His Communist ideals will come back to haunt him.
June says that “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.”
I’m not so sure anymore, and neither are millions of Americans.
“That doesn’t mean that the housing market is doomed;”
What wisdom! and thank goodness for that.
“Ultimately, it will get better,” June says. Of course it will, it always does. Let the market take care of the overage of houses. Yes, there will be joblessness. Yes, there will be too many houses, but that drives down prices and we all know they are too high.
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,” she wisely advises, “if you’re feeling insecure about your job or low on cash, hang tight and save your money. And if you must move, rent.”