http://finance.yahoo.com/news/ameri...ning-a-home-210647970.html?source=Patrick.net
Americans now view a home as a poor investment. The Case-Shiller-Thompson survey of home buyer expectations shows potential buyers, on average, expect a home to appreciate just 3% per year over the next decade. That’s about 1.5 percentage points lower than the average mortgage rate right now, which means money invested in a home would basically offer a negative return. In 2004, near the peak of the bubble, the expectation was a 12% annual gain for a decade. That was clearly outlandish, yet in a healthy market, expected gains on a home should at least be higher than the average mortgage rate. When it’s lower, rational people will spend their money on something else.
More young people may prefer renting. Many Americans in their 20s and early 30s found jobs tough to come by during the recession, while also dealing with onerous levels of student debt. Committing to a big purchase like a home may be the last thing they’re able or willing to do as the economy recovers. It remains to be seen whether young workers will generally sour on homeownership, or just end up owning homes later in life than their parents. For now, however, they seem to prefer renting in cities over growing roots in the suburbs or other places where homes tend to be more affordable for first-time buyers. (And some, regretfully, are still living with their parents.)
Institutional buyers may be largely responsible for the housing rebound. Sales of residential properties to investors spiked in 2012, to about 8% of total sales, according to research firm RealtyTrac. That may not sound like a large percentage of the total, but in a market characterized by tepid demand and limited supply, investor activity may have been enough to account for much of the 11% gain in home prices in 2013. If so, that may have created the false impression that healthy demand from ordinary buyers was pushing up prices. With interest rates and home prices both heading higher in 2014, housing may be less of a buyer’s market, scaring off investors hoping to buy at the bottom. That could reveal a market in which fundamental demand is weaker than expected.
Americans are spooked about the entire economic outlook.Consumer confidence has been up and down and remains far belowwhere it was before the recession. The portion of Americans who feel the country is on the wrong track is more than 30 points higher than those who feel things are going right. Buying a home generally requires a sense of optimism about your own circumstances and, more broadly, the economy in general. Americans aren’t feeling it.
It’s entirely possible that, at some basic level, homeownership still retains the same allure it has for the past 50 years, and we’re still in the process of shaking off the psychological and financial sting of the housing bust. In the meantime, however, homes are getting less affordable, especially for first-timers. Tomorrow's homeowners could be waiting themselves out of the market.
Americans now view a home as a poor investment. The Case-Shiller-Thompson survey of home buyer expectations shows potential buyers, on average, expect a home to appreciate just 3% per year over the next decade. That’s about 1.5 percentage points lower than the average mortgage rate right now, which means money invested in a home would basically offer a negative return. In 2004, near the peak of the bubble, the expectation was a 12% annual gain for a decade. That was clearly outlandish, yet in a healthy market, expected gains on a home should at least be higher than the average mortgage rate. When it’s lower, rational people will spend their money on something else.
More young people may prefer renting. Many Americans in their 20s and early 30s found jobs tough to come by during the recession, while also dealing with onerous levels of student debt. Committing to a big purchase like a home may be the last thing they’re able or willing to do as the economy recovers. It remains to be seen whether young workers will generally sour on homeownership, or just end up owning homes later in life than their parents. For now, however, they seem to prefer renting in cities over growing roots in the suburbs or other places where homes tend to be more affordable for first-time buyers. (And some, regretfully, are still living with their parents.)
Institutional buyers may be largely responsible for the housing rebound. Sales of residential properties to investors spiked in 2012, to about 8% of total sales, according to research firm RealtyTrac. That may not sound like a large percentage of the total, but in a market characterized by tepid demand and limited supply, investor activity may have been enough to account for much of the 11% gain in home prices in 2013. If so, that may have created the false impression that healthy demand from ordinary buyers was pushing up prices. With interest rates and home prices both heading higher in 2014, housing may be less of a buyer’s market, scaring off investors hoping to buy at the bottom. That could reveal a market in which fundamental demand is weaker than expected.
Americans are spooked about the entire economic outlook.Consumer confidence has been up and down and remains far belowwhere it was before the recession. The portion of Americans who feel the country is on the wrong track is more than 30 points higher than those who feel things are going right. Buying a home generally requires a sense of optimism about your own circumstances and, more broadly, the economy in general. Americans aren’t feeling it.
It’s entirely possible that, at some basic level, homeownership still retains the same allure it has for the past 50 years, and we’re still in the process of shaking off the psychological and financial sting of the housing bust. In the meantime, however, homes are getting less affordable, especially for first-timers. Tomorrow's homeowners could be waiting themselves out of the market.
That is really the only thing wrong with my finances right now.
Yea but it won't always be that way, and it's still an asset vs just renting. I've got friends who's homes were underwater so a lot of them just walked away and took the hit. I held onto my house and just decided to rent it out instead, and now it's back to positive equity (not much, but at least it's not underwater).
