Fox-Pitt Kelton home-builder analyst Robert Stevenson said Wednesday he thinks this year will turn out to be "a bad time to buy a home" as the U.S. economy loses more jobs, especially if buyers don't plan on staying in the house for at least several years.
"While some suggest that now is great time to buy a home given low mortgage rates and falling home prices, we believe that for most homebuyers, the opposite is true," Stevenson said in a report to clients. ...
"Buyers who lose their jobs or who stay in their homes for less than seven years stand to incur substantial losses as home prices decline further in 2009 and the U.S. experiences more moderate home-price appreciation going forward," Fox-Pitt said. "We believe too few buyers do the simple break-even math before sinking their life savings into a house." ...
National home prices were down 23% from their July 2006 peak through October, and Stevenson at Fox-Pitt predicted an incremental 20% drop in prices before bottoming, a peak-to-trough decline of roughly 40%.
"While a drop of 40% seems absurdly high ... it would only put home prices back to where they were at the beginning of 2002," Stevenson said. ...
The analyst's bearish outlook is based largely on escalating unemployment, and jobs are the lifeblood of the housing market.
"As if 2008 weren't bad enough for housing — given the mounting foreclosures, falling home prices, and a tightening credit market — millions more Americans are now in danger of losing their jobs," said Stevenson at Fox-Pitt. "As unemployment heads towards 8%, we expect foreclosures to spike, taking home prices down materially."
Thursday, January 08, 2009
It's a bad time to buy a home
Analyst warns against buying homes now: