Anyone in the market for a mortgage loan is being asked to reconsider making a home purchase until prices drop further, according to a new report from CNN Money. In the report, one expert predicted we could see a housing double dip, meaning any homes purchased now could be in danger of falling underwater.
Home Prices Could Drop 25 Percent
A government report released on Feb. 24 revealed that January experienced a double-digit dip in the number of new homes sold. A couple of days earlier, it was revealed that 90 percent of major U.S. cities saw home-price drops.
This troubling information represents that stress the housing industry is under in the wake of a still-struggling economy, badly-handled mortgages and record-high foreclosures.
As a result of this stress, Robert Shiller, Yale economist and co-founder of the S&P/Case-Shiller home-price indexes, announced recently that “There’s a substantial risk of home prices falling another 15%, 20% or 25%.”
In other words, home prices could reach the lows seen right after the bubble burst, resulting in a double dip.
Why You Should Wait to Buy a Home
With the threat of a house-price double dip on the horizon, there are a couple of reasons to wait to purchase a home:
- Take advantage of better prices: You could take advantage of lower prices for higher-quality homes if you wait to buy.
- Avoid underwater mortgage: If you purchase a home right now and the value drops considerably, you could find that you owe more than the home is worth. Of course, the last thing you want to do is join the ranks of the 27 percent of homeowners underwater.
So how long should you wait to buy? Dean Baker, co-director of the Center for Economic and Policy Research, told CNN Money, “There will be differences by market, but generally, you may get a big discount by waiting a year.”
If you are looking to purchase a home when the time is right, cities like Seattle and Portland as well as the state of California are expected to see big drops in the coming months. But of course, before making your final decision, it’s good to make sure you’re ready to buy a home so you don’t default and add to the record foreclosure numbers already out there.
