71% of Americans think now is a good time to buy a house…
While just 22% think that the average price of houses in their area will increase over the next year.
Plunging housing prices combined with historically low interest rates have persuaded 71% of Americans that now is a good time to buy a house — up 18 percentage points from a year ago and the highest level of housing-purchase optimism in four years.
This could be good news for home sellers, home builders, Realtors, and everyone associated with housing, including the average homeowner. Recognizing that there are many good deals in the housing market is a big part of the “buy” decision and historically this attitude would lead to a sharp increase in housing sales.
The situation today is different for several important reasons. First, housing prices continue to decrease in many areas, and few buyers want to purchase a home and see its value decline immediately. Further, surging unemployment rates and the enormous loss of wealth over the past couple of years has many consumers worried about making major new purchases.
Still, probably the biggest difference has to do with housing credit. Lenders who suffered huge losses by believing housing prices would never decline have gone from excessively easy loan underwriting to just the reverse. And even when mortgage loan underwriting standards return to “normal”, they will seem a lot more stringent than those of the housing boom years.
At the same time, borrowers have also become more hesitant about their use of mortgage credit. Record home foreclosures have made it clear what can happen when borrowers take on more debt than they can handle. As a result, potential home buyers are less likely to “stretch” to buy a home today that they were during the boom years.
Of course, just getting back to a “normal” housing market will represent a major improvement from the housing depression of recent years. Getting people to recognize that now is a good time to buy is the first step. Getting the mortgage finance system functioning normally is the next.
Whether it’s a good time for you to buy depends on your individual circumstances but if all the deciding factors line-up—job stability, money for down payment, plan to stay in house at least 5 years—add up for you this is one of the best markets in Philly to buy in.
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