In a New York Times article today, a gentleman was quoted as saying "I have flirted with buying again many times over the past few years. Let's face it; people are not rational creatures." It goes on to say "But he always resists, figuring housing is still overpriced, and even when it stops declining it will stumble along the bottom for years and years. He says there is plenty of time to get back in if he should ever want to."
At the same time, a summary of the recent California Association of Realtors Board of Directors 531st session paints a new reality we have yet to deal with. At a time when the government is trying to eliminate Fannie and Freddie loans, they are also implementing the Quality Residential Mortgage. This legislation will require buyers to come up with 20% down and have a debt to income ratio of 28/36. Loan terms will be shorter and credit will have to be stellar. FHA is also trying to decrease the number of loans they are making. One of the ways to do this is to make qualifying even more difficult.
What is the result of all of this maneuvering? Fewer buyers will be able to qualify for a loan. To entice buyers to purchase, home prices will have to go down. This will increase the default rate and increase the short sales and foreclosures. Fannie Me is also proposing to decrease the loan limit by substantial amounts and many more buyer will not be able to qualify for a loan and buyers in high cost areas will have to come up with higher down payments.
If buyers aren't seeing the light now and purchasing, they may very well regret their delay in a few years. We sound like a broker record, but the sky hasn't fallen yet and if you don't want to hit the wall, better get ahead of the rock!