Here’s why. The house price-to-income ratio is still HUGELY out of whack, though it has dropped by half since the peak of the bubble in 2005 (yeah, we’ve actually been in a financial crisis since then, it just didn’t become apparent until recently). It’s still double what historical norms say it should be, and the ratio was actually on the drop since the housing crash and recession of the early 90s, until it spiked to octuple it’s low from 1998. Notice how the slope of the downward parabola we’re in right now nearly mirrors the upward slope – assuming this decline stays steady, we have approximately 4 years to go until it will be a ‘good time to buy a house.’

On the same blog linked above, the other day there was a good write-up on mortgage work-outs and foreclosure statistics – approximately 50 percent or so of mortgage work-outs are back in trouble, and approximately 45% of all home sales are foreclosures or short sales.. So yes Virginia, now is a bad time to buy. I’m guessing a lot of those foreclosure or short-sales will not work out in the long term, as people buying them thinking they will have a job in a few months are finding themselves laid off more and more. New York is expecting 250,000 total layoffs in the financial sector alone through the end of 2009, starting from the beginning of this financial crisis, which, while not a huge amount population-wise, is still a huge amount economically because the finacial sector powers the city economically. Imagine what that’s going to do on prices in the Big Apple.

This entry was posted on Tuesday, November 25th, 2008 at 11:18.