Which of the four "F's" are keeping you out of the housing market? (Photo: iStockphoto)
Home Sales: The Four "F"s are still taking hold of buyers -- Fear, Financing, Falling Prices and Finding a Buyer for their 'other' house. That was a tweet I saw the other day from Bradley Hunter, chief economist for MetroStudy, which is a housing market research firm. He leads up a team of 650 researchers in 25 major housing markets across the country.
He followed that up a few minutes later with this one: The "Falling Home Prices" issue may (soon) be less of an impediment to new home sales, as people have less fear of further downside.
I decided to give him a call and take the conversation beyond the 140 characters that Twitter allows. I should note that this required great bravery on my part because economists scare the crap out of me. I made my worst grade ever in college in economics and I usually only understand about every 10th word they say. Hunter was pleasantly easy to comprehend.
He says that he’s had this ‘Four F’s’ concept about buyers and the things that are holding them back from buying a house for awhile. When he first came up with it, the F at the top of the list was fear, as in fear of losing their job or their income. I guessed that financing was at the top of the list, given the current credit crunch. I was close.
"Fear is probably still, if not at the top, it’s tied for No. 1," Hunter says. "Financing is neck and neck."
Falling home prices used to be third. People were daunted by the prospect of losing equity right off the bat, or thinking that if they just waited six months, they could save another $10,000. That seems to have stabilized somewhat, he says, according to the respected Case-Shiller Home Price Indices. (I've actually interviewed Robert Shiller of Case-Shiller fame. He did indeed scare the crap out of me. I mean, he has an economic indicator named after him. He's like an economist rock star. I didn't stand a chance.)
"If people see prices aren’t dropping like a rock anymore, that gets demoted to the fourth F," Hunter says.
Finding a buyer for their house definitely remains an issue for move-up buyers who need to sell their house before they can buy another one. That problem is most prevalent in popular retirement markets, such as Florida, Arizona, Texas and the Carolinas. People want to buy there, but they’re having trouble selling their house in New Jersey, Hunter says. That’s a big part of why the housing market is so focused right now on first-time home buyers. It’s not just because of the $8,000 tax credit for first-time buyers. It’s because those buyers don’t have to sell a house before they can buy another one.
So, I’m curious. Readers: If you’ve been sitting on the fence about buying a house, which of the four F’s is holding you back? Or is there another one that Hunter should add to his list?—Pat Curry