by Dan Krell
Last year I attempted to answer the question everyone was asking, “Should I buy a home in today’s economy?” (see: Is now the time to buy a home? The question continues to be as legitimate (or more so) today than it was a year ago.
The recent big surprise (or not) is the increased chatter about a double dip recession. Unlike last year’s mixed economic data and discussion of a sluggish economy, recent economic data suggest continued angst on many fronts, including housing. Unlike previous years’ economic hardships, when stimulus plans and tax cuts encouraged optimism; recent housing data may not only fail to illicit optimism, but has many experts talking about a deeper recession- or even a depression.
But there are bright spots as well!
Although we have not yet reached the levels to declare an economic depression, consider that Zillow (Zillow.com) reported in January of this year that the decrease in national home values from November 2010 further pushed the fifty-three month decline of the Zillow Home Value Index to 26% from the all time high in 2006. Zillow pointed out that the 26% decrease from the all time high in home values exceeds the 25.9% decline of home values between the “depression-era years” of 1928 and 1933.
Further adding to the buzz in the housing industry is the most recent S&P/Case-Shiller Home Price Indices (standardandpoors.com), released May 31st. Analyzing housing data through March 2011, the conclusion was that nationwide home prices are now where they were in 2002. Data indicated that the U.S. National Home Price Index fell 4.2% during the first quarter of this year; compared to the first quarter of 2010, the index revealed an annual decrease of home prices of 5.1%. The Washington DC region was the only city in this press release where there was a quarterly and annual increase in home prices.
Unemployment continues to be a drag on the economy. Solving this issue might very well be the key to solving the continued housing doldrums. A study conducted by the Florida Realors® (“The Face of Foreclosure”; floridarealtors.org) points out the correlation between unemployment and foreclosure. The April 6th 2010 press release quoted, Florida Realtors® vice president of public policy, John Sebree, as saying “”…In most cases, it was a combination of rising living costs, unemployment or decreased pay, health issues and other factors that caused homeowners to get into trouble. Simple answers and trite political responses just don’t tell the whole story.”
Renting is the other side of the housing equation. Although renting is becoming trendy, it is also becoming more expensive. Trulia’s (Trulia.com) most recent rent vs. buy index of second quarter data, released April 28th, indicated that buying a home is more affordable than renting in 80% of the major cities polled! It was more expensive to buy a home compared to renting in the Kansas City, Fort Worth, and New York City regions of the country; the Washington DC region was rated as one of the areas where it was “Much Less Expensive To Buy Than To Rent.”
Home ownership is not for everyone. If you’re thinking of buying a home, consider that timing the market typically yields mixed results. A better approach to home buying is reviewing your long term plans and goals with your financial planner; as well as a keeping tabs on the local market with your Realtor®.
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Comments are welcome. This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 6, 2011. Using this article without permission is a violation of copyright laws. Copyright © 2011 Dan Krell.