Is it possible that the housing crisis is really just a problem caused by our state of mind, not the state of the economy? Is the thing stopping people from buying houses nothing more than their perceptions? Apparently, to some extent, yes.
We are having what, if economists talked like this, could be described as an irrational fear of commitment.
The facts: The recession is considered over, the country's gross domestic product is growing, unemployment is down and consumer spending is up. Yet, the housing market remains comatose. The only explanation is that we are either all still unemployed and not being counted or we're scared out of our boots.
Want some more evidence that we're just one giant anti-anxiety pill away from fixing what ails the housing market?
1. The number of applications for mortgages is down.
Buyers are just plain scared that banks won't approve their loan. This is the grownup equivalent of hiding in the playground bushes during recess because you think the cool kids won't pick you for their team.
2. People don't believe the worst is over.
They are afraid that home prices might fall further. They are afraid that they could lose their jobs tomorrow. They are afraid of looking like a chump, buying when nobody else is buying.
Without question, the days of house-flipping are over. If you are buying, you are buying for the long haul. Remember this: Rents will most certainly go up -- that's why investors are buying properties like mad nowadays; but mortgages that are locked into the current record-low rates will not. If you are planning on staying put, doesn't it make sense to buy?
As for losing your job tomorrow, ask yourself this: Really? Do you really think that's likely? While new jobs aren't being created with anything close to wanton abandon, neither are they being eliminated with the gusto of three years ago. Do you really want to put your life on hold while you wait to see if The Man sneezes in your direction?
Looking like a chump is a tough one. No one wants to be the last soldier killed before the war ends and no one wants to be a homebuyer who bought when prices were still falling. But that gets back to the long-term strategy. You aren't buying for now, you are buying for the many years to come.
Fear can be paralyzing, but so can group-think. If you read how nobody is buying, you figure all those nobodies must know something. Yeah, they know how to be lemmings.
3. Consumer confidence has plunged, yet we are spending again -- just not on houses.
A recent Nielsen poll found that nine of 10 Americans think the country is still in a recession. The memo went out a while ago that the recession officially ended in June of 2009. Pain and misery have clearly lingered and depressed consumers don't spend money. But if we're all so depressed, how do you explain why consumer spending rose in the third quarter by 2 percent. We're even back to our old ways regarding charging and not saving: Consumer credit is back up to 2009 levels and our savings rate has dropped to 3.6 percent, the lowest level in four years. I see our old ways creeping back, don't you?
We may not be happy, but we're spending again. I have but one question: If you are willing to hit Macy's with enthusiasm, why not the housing market?
The Cities Where People Are Racing to Buy Homes
Viewpoint: Is Housing Crisis Just a State of Mind?
Metro movers index: 1.87
Median home price: $142,000
Home value decline from peak: -53.4%
Forecast change in home price through 2Q 2012: -11.4%
Like most of the state of Florida, the Orlando-Kissimmee-Sanford statistical area was hit hard by the housing crisis. More than one in five homes in the region is vacant, and more than half of all owned homes are now worth less than the mortgages on them. Real estate prices have declined 53.4% since the 2006 peak. By the second quarter of next year, Fiserv projects median home values will decline an additional 11.4%. For every person in the region looking for a home elsewhere, 1.87 people are looking at real estate in the area.
Click through to see what the median price buys in Orlando.
Metro movers index: 1.88
Median home price: $135,000
Home value decline from peak: -59.2% (8th biggest decline)
Unemployment: 13.6% (13th highest)
Forecast change in home price through 2Q 2012: -15.9% (2nd biggest decline)
Almost two out of every three homes with a mortgage in the Las Vegas-Paradise metropolitan area is underwater — meaning the home is worth less than the mortgage on it. This is, by far, the highest rate in the country, and it is 10 percentage points greater than the metro area with the second highest rate. Since the first quarter of 2006, the median home value has dropped nearly 60% in this statistical area, and it is expected to drop another 15.9% by the middle of next year. Nearly 40% of the homes sold in the area had previously been foreclosed upon.
Click through to see what the median price buys in Las Vegas.
This cozy home is an economical choice whose low price sheds light on just how much of a hit Vegas took from the housing meltdown. The home offers mountain views, neat landscaping, ample lighting, access to a community pool and exercise facilities, marble kitchen countertops, a two-car garage, a backyard patio and an decent supply of appliances.
Metro movers index: 1.92
Median home price: $400,000 (9th highest)
Home value decline from peak: -39.9%
Forecast change in home price through 2Q 2012: -6%
The Oxnard-Thousand Oaks-Ventura area of California forms part of the Los Angeles suburbs, and is one of the wealthier regions in the country. It also features some of the most expensive and desirable retirement homes in the country. The median home value is $400,000 — the ninth-highest in the U.S. But even that high price is nearly 40% down from its peak in the second quarter of 2006. Foreclosures in the region are up 24% from last quarter. Many wealthy individuals close to retirement are looking to this area for second homes at bargain prices.
Click through to see what the median price buys in Ventura.
Location: Ventura, Calif.
Sq Ft: 1,878
Ventura, Calif. is a tad more upscale than some other buying hotspots, so it follows that homes are costlier. This 1,878-square-foot single family features a garage, patio and fenced backyard.
Metro movers index: 1.97
Median home price: n/a
Home value decline from peak: -5.9%
Forecast change in home price through 2Q 2012: +2.7%
Fort Worth is unlike most of the areas on our list in some key respects. It is the only one of the 10 where home prices are expected to rise by the second quarter of next year, and the only city with an unemployment rate below the national average. The subprime mortgage crisis appears to have completely missed the Fort Worth area altogether. Home prices are down just 5.9% from their peak in 2009. According to Trulia, the biggest reason for the high rate of inbound searches is the large number of people looking to move from the nearby city of Dallas.
Click through to see what the median price buys in Fort Worth.
This new traditional offers quite a bit of space for its price tag and enjoys some charming landscaping. The home shows just how much bang for your buck home buyers enjoy if they opt for this city in the Lone Star State.
Metro movers index: 1.99
Median home price: $205,000
Home value decline from peak: -50.2%
Forecast change in home price through 2Q 2012: -9.6% (19th biggest decline)
Homes in the West Palm beach area are worth less than half what they were before the recession. Many people have been unable to sell their homes, especially as values are projected by Fiserv to decline an additional 9.6% by the second quarter of 2012. Last year, West Palm Beach had more listings than all but a handful of major U.S. cities. However, inventory will likely be drawn down as foreclosures decline and people begin purchasing dirt-cheap real estate. Nearly one in four of the home sales in the region in the last 12 months was on a formerly foreclosed upon home.
Click through to see what the median price buys near West Palm.
You can live on the water for just over $200K if you purchase this gleaming, tile-floored condo. The unit offers three bedrooms and access to facilities including an expansive swimming pool and tennis courts.
Metro movers index: 2.09
Median home price: $106,000
Home value decline from peak: -59.3% (7th biggest drop)
Forecast change in home price through 2Q 2012: -12.2% (6th biggest decrease)
There is arguably no single housing market with a worse outlook than southwest Florida, and Cape Coral-Fort Myers is the hardest-hit area. Housing prices here have already dropped 59.3% from their peak, and Fiserv projects a further decline of 12.2% by the second quarter of next year. According to Corelogic, 47% of the homes in the Cape Coral-Fort Myers area are worth less than their mortgages. Foreclosures have increased 35% in the last quarter. However, the long-term outlook may be better than these figures suggest. Real estate agents are giving “foreclosure tours” to show homes that are now worth 40% or less of what they were just five years ago, and the number of people looking for homes in the area is nearly double the number looking to leave.
Click through to see what the median price buys in Fort Myers.
Metro movers index: 2.15
Median home price: $199,000
Home value decline from peak: -48.4%
Forecast change in home price through 2Q 2012: -9.2%
Just five years ago, the median home price in the greater Fort Lauderdale area was nearly $400,000. As of last quarter, it was less than $200,000, and still falling. Prices are projected to fall an additional 9.2% by the middle of next year. The area is, however, one of the most popular retirement destinations in the country, and many see the current lows as an opportunity to purchase a cheap second home.
Click through to see what the median price buys near Ft. Lauderdale.
Metro movers index: 2.25
Median home price: $200,000
Home value decline from peak: -23.3%
Forecast change in home price through 2Q 2012: -1.6%
The Charleston-North Charleston area saw home prices drop nearly 23% since the 2007 peak. Nearly 10% of homes are vacant — one of the highest rates in the country. Charleston has been, and remains, a popular retirement destination. According to Trulia, most of the people looking at homes in Charleston are from other parts of the state and other southern cities.
Click through to see what the median price buys in North Charleston.
Sheesh, that's a lot of room for $200K! The home sits on a quarter-acre landscaped lot and enjoys vistas of a nearby river viewable from the home's backyard porch. The interior has vaulted ceilings and hardwood floors.
Metro movers index: 4.36
Median home price: $180,000
Home value decline from peak: -55.4% (14th biggest decline)
Unemployment: 13.4% (15th highest)
Forecast change in home price through 2Q 2012: -14.8% (3rd biggest decline)
This is one of the largest metropolitan statistical areas in the U.S. It also has one of the highest unemployment rates in the country — 13.4%. Poor economic conditions have led to a massive drop of over 55% since home prices peaked in 2006. Prices are projected to fall an additional 14.8% by the second quarter of 2012. The area has had massive foreclosures in the past few years, and nearly 40% of the homes sold in the last 12 months were previously foreclosed upon.
Click through to see what the median price buys in San Bernardino.
Metro movers index: 6.03
Median home price: $170,000
Home value decline from peak: -51.4%
Forecast change in Home price through 2Q 2012: -6.5%
Last quarter, the rate of foreclosures in the North Port-Bradenton-Sarasota area jumped 57%, the third-greatest increase in the country. Since the first quarter of 2006, home prices have dropped 51.4%. Foreclosures are likely to increase for some time unless economic conditions improve, as 40.84% of regional homeowners owe more on their mortgages than their homes are worth. Further, prices are expected to drop an additional 6.5% by the second quarter of next year. For every person looking to leave the area, six others are searching for homes here.
Click through to see what the median price buys in North Port.
At $88 per square foot this home -- which may have given its builder quite the headache since it was constructed just prior to housing meltdown -- seems like quite a bargain. It offers the usuals and a two-car garage. Throw some palm trees into the mix too.