Is now the time to buy a home? Most prospective homebuyers think so, according to a recent study conducted by Gary V. Engelhardt, a professor at Syracuse University.
Despite high unemployment and slow economic growth, about 80 percent of Americans believe now is a good time to buy a home, shows the study, titled "The Great Recession and Attitudes Toward Homebuying."
"Positive sentiment towards homebuying is strong, particularly among young, educated, white and Hispanic households, and is attributable to low house prices and low mortgage interest rates," Engelhardt says. "In fact, the pattern of homebuying sentiment during the current recession looks very similar to that of past recessions. Homebuyer sentiment falls as the unemployment rate increases, and improves as job growth returns and housing becomes more affordable."
If buyers feel this is a good market to buy a home, why do home sales remain sluggish?
"There are a number of likely reasons for this," Engelhardt says.
First, sellers are expecting to sell their homes for what they were once worth at the height of the market, he says. (A quick advice to these sellers: it's time to face reality or take your home off the market.)
"Second, underwater homeowners cannot adjust their minimum sales prices much below the outstanding mortgage balance, because they would need to bring cash to the table at sale," he says. "And finally, with large declines in market values, sellers now hold a highly leveraged option that pays off with any future increase in prices."
Speaking of sellers, their sentiment about the housing market has changed dramatically in recent years, the study shows.
Unlike in previous recessions, sellers feel much more negative about the market than they did in past recessions, Englehardt says.
"From 1992 through 2005, positive homeselling sentiment fluctuated between 40 and 60 percent. Since 2005, sentiment has dropped precipitously, to around 7 percent currently, even while home-buying sentiment remains high," he adds.
Are you trying to buy or sell a home? What's your take on the current housing market?
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