Home-buying market favors first-timers, renters

CLARKONOMICS: There’s been so much bad news recently on the housing front. New data shows housing prices that started to stabilize have now fallen back. In some big markets, home values are back to where they were a decade ago!

Based on that, the predictions I’ve been seeing have shown a new level of pessimism. Now you have people talking about more precipitous drops in value. That’s the headline. But behind the headlines, I’m not worried.

We are further along in working off excess housing that was built during the speculative bubble than you might think. The truth is supply and demand is getting more in synch thanks to a lack of new construction. And then when the jobs return, people who are doubled up living with others will want to go out on their own. That natural household formation will help soak up more excess housing.

So today is a fantastic time, especially for first-time homebuyers and those who are renting but want to own. (Not to mention that this is the best time in my lifetime for those interested in owning a vacation home.)

When you’re talking about housing, there’s something called the affordability index that goes back to 1970. Economists are now saying the affordability of housing is at the best level it’s ever been in the 41 years since records were kept.

So look at it like this: You have the cheap price of housing and money that’s available on the cheap to those who qualify. Taken together, that means there’s never been a more affordable time to buy.

To make money from a house, though, you have to stay put for some time, usually a minimum of 7 years. It’s a mistake to think you can buy a home and quickly dispose of it like yesterday’s fast food.

Be sure to hold on to any home you buy for a good price with cheap money!