Why Housing Should Rebound In 2011

There may finally be some fantastic news this year concerning the nation’s dismal housing marketplace. Or, a minimum of, the negative news could stop.

                                         

Either way, it’ll be welcome relief for present homeowners together with for possible real-estate investors. Factors to become optimistic have been sadly lacking since the housing bubble burst in 2006

 

For positive, last week we learned the widely watched S&P/Case-Shiller home-price index fell 1% in December, its fifth straight decline. The index tracks 20 major markets.

 

But that figure belies true factors to be optimistic, according to some experts. If they are right, it might make sense to jump into genuine estate. The trick is avoiding getting burned again, and it doesn’t necessarily mean owning a home.

 

First, let’s recap the economic signs a bottom is close.

 

Houses Are a Good Deal

 

Housing is the most affordable it has been in decades, according to analysts at Moody’s Analytics. They don’t just look at house prices. They also look at incomes.

 

Nationally, the cost of a house is the equivalent of about 19 months of total pay for an average family, the lowest level in 35 years. Prices usually average close to two years pay, although that varies nationally.

 

At the peak, midway through the last decade, a home in Los Angeles cost the equivalent of 4.5 years pay. The average price has given that fallen to just over two years income now. That’s nicely below its pre-bubble average of 2.6 years. This means average Los Angeles homes are cheaper in real terms than they were typically during the period 1989 through 2003.

 

The opposite is true around the Washington beltway, where it’ll take 26 months of pay to buy a home, versus the historical norm of 22 months.

 

In the end, it is going to be affordability that will drive people to buy homes.

 

Pricing is down so much in some markets that when you analyze renting versus owning it makes much more sense to own.

It is definitely bullish. But what about timing?

 

Housing prices will probably bottom in 2011

 

Perhaps prices could dip another 5%. Still, in the scheme of things, that’s small. Consider this: In some markets, home prices have fallen by half or more since 2006.

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Category : Blog &How's the Market? &National Housing News

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