SHOULD YOU BUY A HOME IN 2011--25 REASONS WHY YOU SHOULDN'T

 

Has the U.S. housing market reached a "bottom" yet?  Are home prices going to start recovering?  Is the housing crisis going to end at some point?  Today there are millions of American families that would like to buy homes but they are not sure what to do.  After all, nobody wants to end up like all the suckers that bought at the top of the market and now owe far more on their mortgages then their homes are worth.  A lot of people are really afraid to take out home loans right now.  So should you buy a home in 2011?  That is a very good question.  The reality is that there are a lot of reasons why home prices could continue to fall.  Unemployment is still rampant, and American families simply cannot afford to buy homes without good jobs.  Also, lending institutions have really, really tightened lending standards.  That is really restricting the number of buyers in the marketplace.  The number of foreclosures set another record high last year so there are a ton of homes that need to be sold and not a lot of demand for them.  So with all of these factors working against the real estate market, are there any reasons why anyone would actually want to buy a home in 2011?

Well, yes there are.  The truth is that all of the reckless money printing that the Federal Reserve has been doing and all of the insane borrowing that the U.S. government has been doing have flooded our financial system with new dollars.  At some point all of these new dollars are going to cause a tremendous amount of inflation.

Right now we are seeing the price of gas go up and the price of food go up, but eventually the price of everything (including housing) will go up.

When the U.S. economy totally collapses, you are going to want to have your housing expenses locked in.  In a highly inflationary environment you may find that your wages do not keep up with inflation and at some point you may be unable to afford to buy any kind of a decent house at all.  If you are renting, you may have to deal with rent increase after rent increase.

The best way to avoid housing inflation when it comes will be to own your own home and have a mortgage with a fixed interest rate.  But the timing is key.  You don't want to buy that home too early and you don't want to buy that home too late.

So when will the exact "right" time be?

That is very hard to say.

However, to give us all some numbers to think about, the following are 29 absolutely crazy statistics about the housing crisis that show just how nightmarish the U.S. housing market is right now....

1. During the first three months of this year, less new homes were sold in the U.S. than in any three month period ever recorded.
2. Home prices just keep falling month after month.  The Standard & Poor's/Case-Shiller 20-city index has fallen for seven months in a row.
3. U.S. home prices have now declined 32% from the peak of the housing bubble.
4. In Phoenix, Arizona home prices are now down 56% from the peak of the housing bubble.
5. Home prices in Las Vegas, Nevada are now down 58% from the peak of the housing bubble.
6. Nearly 70 percent of all Las Vegas mortgages are now underwater.
7. Due to the housing crisis, there are now more than 167,000 vacant homes in the state of Nevada.
8. It is estimated that 25% of all mortgages in Miami-Dade County are "in serious distress and headed for either foreclosure or short sale".
9. According to a recent census report, 13% of all homes in the United States are sitting empty.
10. 10 According to the U.S. Census Bureau, 18 percent of all homes in the state of Florida are sitting vacant.  That number is 63 percent larger than it was just ten years ago.
11. In the city of Detroit alone, there are more than 33,000 abandoned homes.
12. The average home in the city of Merced, California has declined in value by 63 percent over the past four years.
13. U.S. home values have fallen an astounding 6.3 trillion dollars since the housing crisis first began.
14. California had more foreclosure filings that any other U.S. state during 2010.  The 546,669 total foreclosure filings during the year means that over 4 percent of all the housing units in the state of California received a foreclosure filing at some point during 2010.
15. Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.
16. Approximately 26 percent of all renters in the United States spend more than half their pre-tax income on rent.
17. It is estimated that 49 percent of all American renters are paying out more in rent than they can afford.
18. In 1996, 89 percent of Americans believed that it was better to own a home than to rent one.  Today that number has fallen to 63 percent.
19. 72 percent of the major metropolitan areas in the United States had more foreclosures in 2010 than they did in 2009.
20. Two years ago, the average U.S. homeowner that was being foreclosed upon had not made a mortgage payment in 11 months.  Today, the average U.S. homeowner that is being foreclosed upon has not made a mortgage payment in 17 months.
21. In September 2008, 33 percent of Americans knew someone who had been foreclosed upon or who was facing the threat of foreclosure.  Today that number has risen to 48 percent.
22. During the month of January, it was estimated that there were 1.8 million distressed homes in the United States that had yet to be listed for sale.  Many analysts believe that this "shadow inventory" will extend the housing crisis for several more years.
23. In February, U.S. housing starts experienced their largest decline in 27 years.
24. Now home sales in the United States are now down 80% from the peak in July 2005.
25. Bank repossessions and short sales now make up approximately 30 percent of all home sales in the United States.
26. As of the end of 2010, new home sales in the United States had declined for five straight years, and they are expected to be lower once again in 2011.
27. 31 percent of the homeowners that responded to a recent Rasmussen Reports survey indicated that they are "underwater" on their mortgages.
28. Deutsche Bank is projecting that 48 percent of all U.S. mortgages could have negative equity by the end of 2011.
29. According to the Mortgage Bankers Association, at least 8 million Americans are currently at least one month behind on their mortgage payments.

COMMENTARY:   On February 24, 2010, I predicted a second real estate bubble to occur in mid-2010, but that never happened for various reasons, although foreclosures for 2010 set a new record.   On December 28, 2010, several real estate experts, including me,  predicted a real estate bubble to occur in 2011.    

After reading the above article, I think it's safe to say that 2011 is most definitely NOT a good time to buy a home, although the Fed's radical use of quantitative easing, has the potential create a number of economic problems, not just inflation.  However, if you are ready, willing and financially able to purchase a home, look into foreclosed homes.  There's a ton of them.  To help you in your quest, check out RealtyTrac's Interactive Foreclosure Map:

Courtesy of an article 26, 2011 appearing in The American Dream and RealtyTrac

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Comments

[Handy Man Seattle]

Liked your site. Looks like simple but awesome. Please keep this to update!

[Randy Robinson]

True. It may not be wise to buy a home when you consider factors like the economy and money. Nonetheless, you have to consider that buying a house has other personal benefits, ones that don't have a value in money.

In the end, you have to think carefully. If you want to buy a home, be sure that you are capable of paying for it. Design long-term plans that you can finish.

[Tommy]

Many real estate forecasters had predicted that prices would continue to decline and an uptick in foreclosures in 2011. Both came true. The Bubble is more of a fizz-fizz, but with prices falling every month in the majority of the top 25 real estate metropolitan markets, there is always a danger of investing in a property, being unable to sell the property, and see a slow, painful decay in your equity. Most banks now require at least 25% down, to protect themselves, but they are interested in live-in buyers with good credit, and adequate income to insure they can make the monthly mortgage payments, insurance and taxes.

[Avril Copperfield]

It's very tough to predict the best time to purchase a home. Hmm... the best way to find out the opportune time is to observe and analyze the real estate bubble and its ripple effect on our personal finances.

[Foreclosures in NJ]

Great post! Although it is a really bad time for sellers, don't you think this is an excellent time for buyers? Your post suggests that one shouldn't purchase a home, but if the prices are lower, wouldn't this be the prime time to buy...especially a foreclosure? Just wanted to hear your thoughts...thanks!