Is it a good time to get into real estate?
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TEXT OF INTERVIEW
Kai Ryssdal: Knowing all that -- that consumer confidence is down and home prices are still sliding -- maybe it's time for some counter-intuitive behavior, like thinking about getting into the housing market.
Dan McGinn writes on real estate for Newsweek magazine.
Ryssdal: Dan, welcome to the program.
Dan McGinn: Thank you.
Ryssdal: So you roll these reports from the past couple of days into one big ball of wax. What does it mean if you're sitting there observing the housing market thinking about buying?
McGinn: Well, the fact that transactions are up but prices are down is actually a good thing. The reason we saw the numbers we've seen the last couple of days is that people who've had a "For Sale" sign in front of their house are seeing the stock market going wildly up and down, the consensus now that we're in a recession and the notion that this housing market is not going to turn around very soon, so I think the numbers that we saw yesterday and today represent people throwing in the towel and saying "you know, if I want to sell my house, I have to be more realistic about what it's worth."
Ryssdal: I don't want to put the pressure on you right out of the gate, but is this now officially a buyer's market? I mean, can we pick or choose out there?
McGinn: Oh, I think it's been a buyer's market for quite some time. Inventories are great. Mortgage rates are below 6 percent. If you don't have to sell a house, this is a good time to buy one. The problem is, many of us, if we want to buy a new house, we have to sell our old one and that's not so easy.
Ryssdal: The other thing we have to do is get a mortgage and we've been hearing so much about this credit squeeze and liquidity crisis. Can I go out now, assuming I've got average to decent credit and get myself a mortgage for a 30-year loan?
McGinn: You need three things. You need at least average credit scores these days, you need to have a down payment -- something you didn't need to have a few years ago and you also have to have a good job with the ability to actually prove that you make some money. No more no documentation loans for you.
Ryssdal: I want to run a word by you and see what your take is. What would you think if I said "bottom of the market."
McGinn: I'd say you're a very optimistic guy.
Ryssdal: Well, put a number on it, put a timespan on it.
McGinn: Even the National Association of Realtors' economists yesterday, who was crowing over these good numbers, said maybe in the second half of the year we'll start to see things firm up. Optimists would say late 2008; I would probably say 2009.
Ryssdal: So if I'm a buyer, should I just hang around for a little while?
McGinn: It depends what your mentality is. There are some people who are afraid of the notion of buying a house and watching the value go down even a little bit more. You have to put it in perspective. If you buy a house today, depending on where you live, you're probably paying 10 percent -- maybe even more -- less than you would have two years ago. That's not a bad deal. Might it go down a little more? Sure, but you're probably going to own it for five, seven years. I don't think it's a bad time to buy.
Ryssdal: Yeah, but continuing that train of thought, though, depending on where you live and where you buy, it might have another 20, 30 percent to fall.
McGinn: The most extreme views on the housing market is that we're going to see 30 or 40 percent declines, but that is somewhat of an extreme view. Probably the median prediction would be 15 percent declines, which means we're probably two-thirds of the way there. I think prices will go lower; I just think they've gone down far enough that if I was having a child or needed a bigger house and I didn't have to sell my own house, I would be thinking about it right now.
Ryssdal: Dan McGinn covers real estate for Newsweek magazine. His book is called "House Lust." Dan, thanks a lot.
McGinn: Thank you.