The Housing Crash – Continuing its downward spiral

The Housing Crash – Continuing its downward spiral

The housing prices in the United Stated continue to fall in most cities. But an interesting fact to take note of is that compared to the income of most people, the cost of buying a house is dangerously high. Also, renting a house is much cheaper to buying a house.

Buying a house – Not a good option, as yet

If you have made the rounds and talked to a few landlords, you will have realized by now that the price quoted for a house can be almost 15 times, the annual rent of the house. There is an appreciable price decline, but it still does not make sense to buy a house. Banks have become stricter with their mortgage disbursement and want a 20% down payment. The kind of salaries that people earn and the cost of renting a house, give an indication that housing prices are going to fall further. So, why not wait for them to hit rock bottom, before actually buying a house.

Renting is the cheaper option

On the coasts, you will have to shell out 3% of the purchase price for the annual rent of the house; on the other hand the mortgage rates are 6% of the purchase price. Do your math. It’s definitely cheaper to rent a house, than own a house. Say, you still think buying a house is a good idea, but once you add the insurance, maintenance and taxes, you might just start rethinking your decision.

But what if you still want to buy a house?

Here’s where you need to calculate the “bottom price” This price can be calculated by analyzing whether the renting out of the house that you are going to purchase will help cover your mortgage and associated expense. If the answer is a yes, you know the price of the house is low enough. You must look at eliminating all risks when you are buying a house these days.

The builder problem

Right now, builders in America are facing a glut of new empty houses. It’s the builders who are being forced to drop the prices of their houses faster as compared to the owners. Why you might ask? The reason is very simple. They need to sell in order stay afloat. Current prices have made it difficult for the builders to sell their excess inventory. So, the prices will continue to fall. If you have money in hand, stick to it for some time. You can make it work, big time, after some months.

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