評論
打印
Talk about capitulation! Judging from my mailbag following last week's coverage of the Case-Shiller housing numbers, almost nobody has a good word to say about the real estate market any more.
I'm an instinctive contrarian. So I hope readers don't take it the wrong way when I say that when so many of you agree with me, I start to get nervous.
And where is my hate mail? The brokers must be totally whipped. Even a year ago anyone questioning housing prices could reliably expect a torrent of furious replies from those in the business.
Today? Almost nothing. And the few left are mostly of the 'U r an idiot (Sent from my iPhone)' variety. Pitiful.
Maybe the moment of maximum pessimism is at hand after all.
So let me play devil's advocate and consider the positive case for buying a home right now.
The key factor: Interest rates.
If you can borrow at 4.5% or 5% over 30 years, many purchases start to look appealing. Especially if we get a hefty dose of inflation down the line.
If that happens, your monthly payments will be low and you'd get to repay the principal over time with devalued dollars. That's a double win.
Inflation isn't guaranteed: The bond markets are only predicting about 1.4% inflation over the next 10 years, and BCA Research recently reminded clients that deflation, or falling prices, remains a danger. Unemployment is still rising and recent wages actually fell.
Yet if you had to bet from here, you'd bet on inflation in due course. The government is running massive deficits and has the printing presses at full throttle. That's the classic recipe.
And inflation is the debtors' friend -- which is why it is surely going to prove the politically expedient way out of this mess.
Anyone purchasing hard assets like real estate, with a 5% fixed rate loan, ought to make good money if that happens.
When it comes to the house prices, it's true they may not have fallen as far as you might expect.
A recent analysis in the Financial Analysts Journal ('When Will Housing Recover?') suggested prices nationwide still weren't cheap by historical standards in relation to household incomes.
Homes were much cheaper, say, as recently as the 1970s.
Furthermore: the bigger the bubble, the bigger the bust. Considering how sharply home prices climbed from 2002 to 2006, one might expect real estate to end up really, really cheap before bottoming out. And you wouldn't expect a quick rebound either. Japan still hasn't recovered from 1989.
But if you are thinking of buying a home, here's the more positive news: While overall market averages may not be as cheap as you might have expected, you can probably ignore them.
There are plenty of deals taking place far below the official average levels. The indices are masking a huge disparity in prices.
Even the National Association of Realtors concedes distressed sales including foreclosures and short sales are closing about 20% below 'normal' market rates. (Never mind how to define 'normal').
Aggressive buyers are finding some simply terrific deals. And they're paying with cheap debt, too.
Default rates are rising. Lots of sellers are forced. A buyer with options holds all the cards.
Once upon a time, the name of the real estate game was 'let's make a deal.' Today, it's 'take it or leave it.' If the seller won't take your offer, his neighbor probably will.
