[quote=briansd1]In economic theory, it’s a good time to buy when buying is cheaper than rent. Because in theory you can jump in an out of the market at will. In theory, you have unlimited capital and perfect liquidity.
In practice, you need a downpayment and credit to buy a house. If you have the sell the house, you have to pay commissions and you might have to sell at a low price just to get rid of it.
In practice, most buyers max out on their mortgages and the vagaries of life can make the purchase unaffordable.
Who knows where your job and family situation will take you a few years down the road.
To me, this statement below is very indicative of borrowers in over their heads. They need prices to remain high, in order to refinance (kick the can further down) or sell.
Despite talk by some that homeowners have plenty of equity and wherewithal, the facts are that the $8,000 rebates and the GSE increasing the limits following the 2008 crisis did spur homebuying.
Now that the incentives are gone, the market is taking the appropriate hit.
If a homebuyer really needs an $8,000 rebate to buy a house, then we have still have an affordability problem.
With prices falling again, economists fear that the nation’s housing market could enter a new downward spiral, with declines pushing more borrowers underwater, triggering more foreclosures and setting off further drops.
