Homebuyer: Fear of the Unknown

My father used to tell me that "perception is reality". Well the perception out there is that the real estate market is a disaster, at least as presented by the media. I concede that if you are a seller that things are slow. But if you are a buyer, this is a PHENOMENAL market, certainly the best since I've been selling real estate (2002) and probably the best since 1991.

So why are so many buyers (especially Renters and 1st Time Buyers) sitting on the sideline?

I think that it is a fear of the unknown, a fear that is being stoked in the media. Here are some tidbits from a recent article AP article by Marci Gordon about Fannie Mae, housing price drops, and their outlook for the near future:

Home foreclosures are accelerating around the country, adding to the glut of unsold properties and further depressing prices. As a result, a growing number of homeowners are saddled with loans that outstrip the value of their houses.

"I think that right now we are in the belly of the cycle," Fannie Mae's president and CEO, Daniel Mudd, said during a conference call with analysts.

Mudd said home prices fell in the first quarter "faster than anyone anticipated" and that the company foresees a decline of 7 percent to 9 percent for the year, compared with earlier forecasts of a 5 percent to 7 percent drop.

Now if I'm a potentail buyer and I read this, I'm thinking glut of inventory, panicked homesellers, falling prices...hmmm.....SOUNDS LIKE A SALE! Ah, but then I read further:

When businesses see consumer confidence buckling under the housing slump, they too start to cut back, noted Michael Gregory, senior economist at BMO Capital Markets in Toronto.

The tax rebate checks arriving in Americans' mailboxes may mitigate the chill for a while, but eventually the weakness in the housing market "will continue to drag down consumer spending," he said.

"Is the average American prepared to step up and take out a loan and buy a house? Probably not," Gregory said.

(My emphasis)

There's the buzzkill. Someone much smarter than me, and a senior economist no less, implies that it would be a risk to "step up" and buy a home. I agree that my "consumer confidence" is shaken, but that means that I'm probably not running out to Best Buy to buy a 52" TV. But is it really a risk to be a homebuyer?

Consider the reality (not the perception) as if you were a Renter or 1st Time Buyer:

• This market is an opportunity to lock in a purchase of a home for potentially the same monthly payment as rent. Housing is not discretionary spending; its a necessity so why not own rather than rent.
• If you lose your job, and you can't pay your mortgage, then guess what: you wouldn't be able to pay your rent! Plus, with proposed bailouts and the way foreclosure laws are, you'd probably would be able to stay in a house you own longer than one you rent.
• Renting from an individual investor? Whats to say that he doesn't go into foreclosure with your rental home.
• Mortgage meltdown? If you're a 1st Time Buyer, there's a plethora of loan programs out there for you.

Sure its scary out there, but this too will pass. Take the fear of the unknown out of the equation and its the perfect time for unencumbered buyers to get in the game. If you buy today, the reality 5 years from now will be percieved that you made a good decision.

Click here to read the entire AP article by Marci Gordon about Fannie Mae in the Morris Daily Herald.