Cheer up about the depressed market
The housing market is slowing, and it is affecting all aspects of the economy. Home sales are the lowest they have been in years, with an overwhelming surplus of these un-bought homes lingering on the market.
Not only is the slowing market affecting the real estate world, but it is also affecting other sectors of the economy as well.
Not every market is the same, but some are seeing job levels drop in industries related to the housing market such as construction and finance. Also, many popular stocks have seen better days due to the depressed market.
The media hype surrounding the slowing market is overpowering, and most people that have already bought a home and are not planning on leaving are just fine, and the slow down will really not affect them much.
An August 30, 2006 article by Buz Livingston of fool.com, “Let’s Buy a Home,” gives a relatively positive spin on the slowing market.
“If you've been living in your home more than three years, you're still sitting in the catbird seat. Even if it has dropped in price, it's still worth more than you paid for it. Should you have sold last year? Hindsight is always 20/20.Unless you're planning on selling, does it matter what prices are? Until it's time to rent the U-Haul and pack up the house, I wouldn't worry too much about it.”
Everyone seems to be up in arms about the “bust” of the market, but the only people that should really be concerned are those who are trying to sell their home. These people could face some difficulties.
Although prices are dropping in some areas, your house is probably still worth more than you bought it for a few years back. Your equity may decrease a little, but it will probably not be that significant of an amount.
People do have a reason to be concerned though, since this slowing market does have other effects on the economy.
“Prospective homebuyers are certainly skittish. Sales of previously owned homes have dropped to their lowest level since January 2004. The inventory of unsold homes is a record high. It's no surprise -- interest rates continue to rise, and there are additional concerns over the economy. As a result, 2006 has been a rough year for homebuilder stocks such as Toll Brother, Pulte Homes and Centex. All these former Wall Street darlings are hovering around their 52-week lows. Like Chicken Little said, the sky must be falling.”
Even though the market is slow, most people agree that buying instead of selling right now is still a good idea, especially since there is such an excess amount of homes on the market to choose from.
“If you're planning on living in the same location for several years, buying instead of renting is still a good idea. Generally, you can claim your mortgage interest and property taxes as itemized deductions. In addition, on the sale of a primary residence, a married couple can exclude from taxes gains of up to $500,000 ($250,000 for single owners).”
One thing you should not do during the housing slump is to take out of your home equity, because you could end up owning more than your home is worth in the long run.
“Two things get homeowners into trouble; the first is using your home as an ATM. Banks eagerly promote home equity loans and lines of credit, but don't fall for their siren songs. Your home is not a piggy bank. The other major pitfall? Using an interest-only loan to buy more home than you can afford.”
