Oxstones Investment Club™Though housing prices have dropped to new lows, folks aren’t sure a home is a solid investment anymore.
Houses are dirt cheap right now. In fact, homes are more affordable than at any time since the National Association of Realtors began measuring the data back in 1970, Bloomberg reports.
But people aren’t buying. The economy and the tightened lending market have all but removed the possibility of homeownership for some. But there’s another interesting sentiment developing: More and more people just don’t want to buy anymore.
The percentage of people who think of a home as a safe investment has dropped to just 64%, Bloomberg reports. That’s the lowest ever reported in the national housing survey from Fannie Mae, and down from 83% in 2003.
So many people have turned away from homebuying, in fact, that we may be seeing a culture shift. Maybe the house with a white picket fence is no longer part of the American dream.
Well-known investor James Altucher lists several reasons owning a home is a bad idea in a recent blog post. Housing prices historically haven’t risen enough to merit that huge down payment, he said. Homeowners also must deal with closing costs, pricey maintenance, property taxes and the fact that most of their life savings is tied up in one investment.
“I’m never going to buy a home again,” Altucher writes. “And sit there in the middle of the night thinking, ‘Why the hell did I do this to myself again?'”
Other renters feel the same way. “The magnitude of the housing crash caused permanent changes in the way some people view homeownership,” one finance professor told Bloomberg. “Even as the economy improves, there are some who will never buy a home, because their confidence in real estate is gone.”
You can almost see this conflict playing out in the stock price of homebuilders such as Toll Brothers (TOL). Check out the one-year price chart to the left. Investors don’t know what to think of this sector. The three-year chart is even more telling.
Economists tell Bloomberg that the economic crisis destroyed the notion of a house as a risk-free investment. It was just a standard assumption that whatever house you bought would increase in value. No one expected to be underwater on their mortgage or in foreclosure.
But at the end of last year, a shockingly high 11 million homes in the U.S. were worth less than what owners owed on their mortgages, Bloomberg reports.
And in March, the percentage of Americans who plan to buy a home in the next six months fell by 23%. Certainly that share will recover as the economy improves. But it will be very interesting to see the long-term chart of this sentiment. Are we becoming a nation of renters?
http://money.msn.com/top-stocks/post.aspx?post=3d10f9ea-067f-477f-aabf-100f1b092d7e
Tags: homeownership, house prices, housing crash, renting, risk-free investment, Toll Brothers (TOL), U.S.