The American Dream... is it dead or alive?
Yes home prices have declined. Yes millions of homeowners have lost equity. Yes millions of homeowners owe more than their home is worth. Yes millions of homeowners have "walked away" from their homes. Yes millions of homeowners completed a short-sale or went thru foreclosure.
But....
What about family stability?
Can you put a dollar amount on the importance of a safe, secure and stable environment for your family? I don't think so!
Numerous studies have shown children benefit from the stability of homeownership. Personally, I am grateful that my mom owned "our" home my entire life.
There are numerous tangible benefits of owning a home...
Don't crush the American Dream
Time to Buy-Even if Prices are Going Lower
Huh?
why buy if home prices are going lower in most areas of the country?
Home prices may not be at the bottom but the "Actual Cost" of buying a home may be at the bottom.
I believe home prices will continue to fall based on 2 main factors:
1. Existing Months' Supply of Inventory Is Still Too High
A balanced market (where prices are stable) can handle 5-6 months worth of active inventory. Anything less than 5
months constitutes a seller's market as there are not enough houses to meet buyer demand. This usually results in price appreciation. Anything more than 6 months constitutes a buyer's market as there are not enough buyers for the
number of houses on the market. This usually results in price depreciation.
Currently, as per the National Association of Realtors (NAR), there is a 9.2 month supply of inventory.
This alone would put downward pressure on prices.
2. Distressed Property Inventory Is About to Enter Market
There are over over 4 million homes that have the potential to become a distressed property sale (foreclosure or short sale) over the next few years. A percentage of these properties are set to enter the market before year's end. No one knows exactly how many will come to market in each region but the common belief is that the number will be substantial.
These properties will sell at a discount thereby attracting a portion of buyers in the market. After they close, they can also be used in an appraisal to help establish values of other homes which sell in the area. A short sale sells for approximately 90% of it's non-distressed value. A foreclosure sells for approximately 65% of full value.
Bottom Line:
While home prices will most likely continue to fall, mortgage rates and costs associated with obtaining a home loan will continue to rise. We may never see interest rates at these levels again.