April 25, 2011

Houses Are a Bad Bet (My, How Things Have Changed!)

People buy houses out of faith and necessity, housing analysts say. Five years ago, people bought homes partly because they would appreciate to the point where they sell them for more than their mortgages. But recent housing statistics suggest that faith is coming up short these days. Housing prices slid for the sixth straight month in January and the leading home price index registered a 1% for that month, putting the slide from its 2006 peak at 31.8%. These trends seem to reflect the recent 8.6% drop in the consumer price index.

People feel housing is a bad bet, according to a recent New York Times article. The millions of homes in foreclosure are not on the market, which could gut the housing inventory and push prices down even more. In fact, lenders placed 21% fewer homeowners in foreclosure in January than they did in November, even as the number of loans in severe default held steady. “One reason for fewer foreclosures is that more struggling borrowers appear to be making deals with their banks.”