Cheapest American Homes Not Attractive Anymore

April 20, 2011 / Russell Legato, Residential Property Analyst

Americans today are shrugging the idea of home ownership as they lose confidence in the housing real estate. They would rather rent or lease houses even though prices are becoming cheaper and the economy is improving.

Cheapest American Homes Not Attractive Anymore

According to a Conference Board research firm in New York, the number of Americans that are planning to buy a house in the next six months dropped to 23 percent in March this year.

Traditionally, housing is known to be safer than equities. During the worst housing crisis in 2008, the average US home price declined only by 15 percent compared to 38 percent in Standard & Poor’s 500 index.

The change in outlook is attributed to the recent housing crash where 11 million US homes became worth less than their original mortgages. On February this year, the median US home price plunged to 32 percent from the 2006 peak, hitting a nine-year low.

The drop in homebuyer confidence is expected to be temporary. According to the Mortgage Buyers Association, home sales are predicted to rise by 4.1 percent to $5.1 million by the end of 2011 and by 5.9 percent to 5.4 million in 2012, which will be the highest since 2007.

The recovery however will depend on the availability of jobs. As of today, the unemployment rate is expected to decline every quarter this year and next year.

According to Bank of America Merill Lynch Global Research Senior Economist Michelle Meyer, if there is a lesson learned in this situation, it is that housing is not a risk-free investment.


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