For Better or Worse, Seeing a Buyer’s Market in Houses

One’s judgment of the real estate market is partly a matter of grammatical tense. Focus on the fact that house prices “are falling,” and it’s a bad time to buy. Focus on the fact that prices “have fallen,” and it’s a good time — or, at least, a better time than when those prices were higher. A new Gallup poll indicates people are wavering between those two perspectives.

When asked whether it’s now a good or a bad time to buy a house, a majority (53 percent) said it’s a good time. That’s down from the 58 percent saying the same last April, but up a notch from the 52 percent saying so early in 2006. Among people making $75,000 or more (i.e., the ones who might actually get a mortgage in today’s nervous credit market), 69 percent said it’s now a good time.

In the boom years, potential buyers were egged on by their sense that prices would keep rising. That’s finally ceased to be the general sentiment, with just 29 percent now believing house prices in their area will rise during the next year. In 2005, 70 percent felt that way — correctly, in most cases. Last year, 52 percent thought so — incorrectly, in most cases.

The underlying good news is that “the vast majority of homeowners believe their houses have gained value since they purchased them,” notwithstanding any recent downturn. Just 17 percent of Gallup’s homeowner respondents said their home is not worth more now than when they bought it. The bad news is that this is nearly double the number who said the same a year ago.

The obvious winners in the current housing market are first-time buyers, since they needn’t unload a house that’s declined in price before buying another house that’s done the same. That’s especially true in markets where prices have fallen most steeply. The Case/Shiller home-price index shows prices in 20 major markets down an average of 10.7 percent for the 12 months ending this January. In the Las Vegas and Miami metros, prices were down 19.3 percent. First-time buyers in these markets will have much more cash left in their pockets than would have been the case had they bought a year earlier. Surely marketers will wish to help them spend it.