Why would you buy a home now when you could just hold on for a few months and in all likelihood get the home at a lower price? I know I’d wait if I had money right now.
This is a time when cash is king. Investors are looking at the real estate market and with a few exceptions, they’re staying put, waiting for prices to plunge further.
“Really the housing market is still in the doldrums,” said Gerd-Ulf Krueger, principal economist at Housingecon.com. “I think what’s really holding it back is an utter lack of confidence that this will turn around soon.”
The factors in favor of buying are many: Interest rates recently hit their lowest level all year, prices are so low that it is now more affordable to buy than rent in several markets, there is a steady supply of homes because of the number of foreclosures and other so-called distressed properties in the pipeline, and the government is continuing to fund low-cost loans for buyers that require little down payment.
But none of that appears to be overriding the sense of fear buyers have about prices, said Patrick Newport, chief economist for consulting firm IHS Global Insight.
“The key thing that accounts for the weakness is the fact that housing prices are dropping,” Newport said. “It creates a lot of uncertainty and it spooks a lot of people from participating in the housing market because people don’t want to buy if your home is going to drop in value right off the bat.”