Housing Fundamentals Are Solid, but Confidence Needed

Potential homebuyers are “spooked” by the stock market tumbling, the deficit mess in Washington and economic news, according to a Moody’s Analytics economist.

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“Obviously, there are problems out there” that are depressing home sales, said MA associate economist Mike Zoller.

Buyers are hesitating because they may be afraid of losing their job or making such a huge financial commitment with all this turmoil. 

“If they can wait six months or a year to buy a house, they probably will,” he said.

However, when it comes to the fundamentals — house prices, interest rates and affordability — “people should be buying homes,” Zoller said in an interview.

The price-to-rent ratio also is near a record low. “If you are deciding between renting an apartment or buying a house, it makes financial sense to buy,” Zoller stressed.

Meanwhile, the economy is creating some jobs.  And personal incomes are above their pre-recession peak, he said, which generally signals the beginning of an expansion.

The one missing piece is confidence.  “Everything is there: people just have to feel comfortable,” the economist said.

Moody’s Analytics forecasters believe sales of existing single-family homes (not including condos) are at or near their lows and sales should start increasing in the fourth quarter.

House prices could bottom by the end of the year with appreciation starting in early 2012. 

However, house price increases will be “modest” in 2012, Zoller said, partially due to distressed sales.

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Article source: http://www.nationalmortgagenews.com/dailybriefing/2010_414/housing-fundamentals-solid-1026193-1.html?CMP=OTC-RSS

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