Are people buying, waiting, or just pulling their hair?

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If you’re looking to buy a house, you’ve probably had your share of frustration. You might have even been caught up in a few bidding wars that left you discouraged. Or perhaps you’re one of the 100 million Americans who no longer believe that owning a home is a realistic way to build wealth.

There are a lot of mixed feelings when it comes to homeownership. So what’s the buzz out there? The National Foundation for Credit Counseling (NFCC) released the results of a recent survey (taken during May & June) and it looks like nearly half of this country is anti-homeownership. People no longer believe in the American dream of building equity as a means to financial security.

More survey findings:

• About one-in-three (roughly 72 million people) don’t believe that they could ever afford to buy a home.
• 42 percent of those who once owned a home but no longer do believe they’ll never afford another one.
• 31 percent of those who still own a home don’t think they could ever afford to buy a second home or upgrade their own.

What will happen next?

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We’ve seen the stock market crash and it came back. It always does. That’s a fact. We’ve also seen housing crashes and the market always bounces back – and that’s a fact.

Here’s a blurb from an article I wrote a few months back titled “Every contractor should operate on this 18 year cycle”

There is a pattern here – real estate booms and busts have been cycling every 18 years since 1800. It happened in 1818, 1836, 1854, 1888, 1908, 1926 and 1944. These peaks were followed by slumps or depressions, which lasted about four years. The pattern was interrupted during World War II but the cycle started back up again in 1955.
You remember the last boom and bust. It started in 1989 when existing home prices peaked and bottomed out in 1991. Then, 18 years later, between 2006 and 2007, it peaked again. Since we’re now in the third year of the downturn, 2010 should bottom out and a new 18-year cycle will begin – peaking around 2024.

Given that homeownership is a great tax benefit and equity builder, why would half of the American population turn their backs on it? As a renter, where will you be 30 years from now? If you paid your mortgage off in 30 years, you’d be sitting pretty. But as a renter, you’ll rent forever.

Our parents compared to us

Look at how our parents lived. They bought their homes with hard-earned money and paid off their mortgage after 15 or 30 years and they rarely took out a dime of equity. Now they have security. They can get a reverse mortgage and live comfortably in their old age.

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2nd generation Baby Boomers and Generation X, on the other hand, bought more housing than they could afford, put little or nothing down, got option arm loans so they could pay less than interest only, refinanced two to four times during the housing peak, bought toys, pools and vacations with their equity, and then lost their homes to foreclosure because they owed more than it was worth due to those refi cash-outs they took.

When I was shopping for a home, I always looked up the owner’s mortgage history and guess what I found? Every foreclosed home and short sale had refinanced two to four times during the final two years of the peak.

Foreclosure stats for July

• Prices have dropped 30 to 50 percent from the peak
• Banks repossessed more than 87,000 homes in July and 79,000 homes the month prior.
• Over 360,000 households received a foreclosure notice (notice of default or trustee’s sale) in July

Investor advice

• Buy low, sell high

This is the best time to buy a house. Don’t let the housing crisis dictate common sense. History has proven time and time again that people who buy during scary times make the most money.

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