Housing bubble stories began cropping up as early as 2002. By 2006, housing was in a "bust," despite only losing 1.7 percent in median values nationally. The National Association of Home Builders commissioned a study to find out if bad press is fueling buyers' reluctance to buy new homes. 19 percent said that they allowed the news media to influence their decision of when to buy a home. The housing market is going through a correction that's badly needed after five years of record sales and price appreciation, yet the financial press and TV news programs are still portraying it as a bust. Even the Federal Reserve's Vice Chairman Donald L. Kohn believes the current correction will not have dire effects on other parts of the economy; Kohn told New York analysts that the "rebalancing" of prices to better fit current demand that is underway in many markets is a normal, cyclical event - not an incipient disaster. In fact, it may even be a healthy and necessary part of the cycle: "The reported declines in new home prices in a number of areas should help facilitate the rebalancing of supply and demand". Lower prices should help expand the number of serious buyers looking for houses.
Here are a few reasons why many economists feel the worst is over: 1: Total existing-home sales rose 0.5 percent to a seasonally adjusted annual rate of 6.24 million units in October from 6.21 million in September. 2: The high end of the residential market —$1 million and above — has been even stronger this year than in 2005 and 2004. 3: There were 151 million-dollar-and-above residential sales in Rhode Island through mid-October of this year, compared with 121 in the same period in 2005, and 103 in 2004. 4: Homeowner benefits, from tax relief to low-interest federally secured loans. 5: Mortgage interest rates are back to February lows. 6: Higher home inventories mean better selection for homebuyers. 7: While unemployment has hit some parts of the country hard, nationally unemployment has trended downward to 4.6 percent.
This Week’s Real Estate Insight: Although the media has focused on the downside of the changing real estate market, Interest rates are low, inventories are high, and now is a great time to buy a home.
