Wes Moss: Is it time to buy a house again?

Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here Monday mornings.

Could the story for housing be any worse?

In 2006, Americans were buying newly constructed homes at a rate of almost 1.5 million per year. New home sales are now at a 250,000 annual pace — an 82 percent decline. Ouch. To put that in perspective, we were selling more new houses during the 1960s than today.

As a result, fewer homes are being built. A lot fewer. We are on pace to break ground on 500,000 private homes in 2011. That’s a decrease of 77% from 2006 when builders started more than 2.2 million new homes!

A few more cozy housing stats:

1. Nearly one-third of all home sales are “distressed” — either short sales or foreclosures.

2. More than 23 percent of all homeowners in America are “underwater” on their mortgage – owing more on their homes than they’re worth.

3. Nationally, housing prices have dropped more than 30 percent. Atlanta is close to the national average, but places like Nevada and Florida are much worse.

The dark cloud’s silver lining

Collectively, this news is so bad it’s actually good news. Very good news. Several current indicators point to a bottom in the housing market:

1. The amount and pace of home foreclosures has leveled off and looks to be peaking.

2. The housing vacancy rate (historically 7 percent) has dropped from more than 10 percent to less than 9.5 percent.

3. The number of consumers who say they plan on buying a home in the near future has increased dramatically in the last few months. The percentage of “would-be buyers” had fallen to a historic low of 2 percent but has recently spiked to 4.5 percent, near an all-time high.

4. We need to add almost 1.5 million new homes per year in the U.S. just to keep up with new household formation. Because the building of new homes has almost come to a screeching halt, demand will eventually catch up with supply.

Bottom line: Housing prices can’t get much worse. They might go 5 percent lower, maybe even 10 percent. But just as the stock market began rebounding in 2009, we are starting to see signs of life in housing.

I have a hard time believing that if you purchase a house this year, and plan on living in it for 5 years or more, that it will be worth less than you paid when it comes time to sell.

So, start shopping! Are you considering buying a house this year or gathering your down payment? I’d love to hear what you’re thinking.

– By Wes Moss, for Atlanta Bargain Hunter

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