Business reporters aren’t paying attention. They look at Wall Street, they look at the numbers government wants them to see, and the rest is show.
But here’s something they should read. Now.
It’s a regular Census Bureau report on housing vacancies, which is put out quarterly. This one is dated Monday.
The big number — 2.8%. That’s the percentage of non-rental homes currently sitting unoccupied. (Drive around and see if you can find some in your area.) The number has been rising steadily for over a year, and 2% is considered a danger sign.
Regionally things are worst in the South (3%) and worst in principal cities (3.6%). The number of homes for-sale and unoccupied was up nearly 50% in the quarter, to 2.1 million.
Now there are reasons why these numbers might be higher than normal. Katrina comes to mind. In my neighborhood, homes are sometimes bought as tear-downs, left empty while other lots are built-up, then torn down. Big condos and loft projects may have units sitting unoccupied for months — as long as most are sold the seller can wait.
But the key, to me, is that one-quarter jump in the number of homes
for-sale and unoccupied. The number was 1.566 million in the third
quarter. That’s not Katrina. That’s homes which are unsold, from which
the residents have moved on awaiting a sale. We had one such home on my
street for almost 9 months. New homes which have not been sold yet can
also appear here — we have three very-expensive ones of that type a
mile north of me.
Dean Baker of The American Prospect, a liberal paper, is raising the alarm bells.
"This record vacancy rate is likely to mean considerably more downward
pressure on house sale prices in the months ahead," he writes.
Maybe. But homeowners have been conditioned to believe that prices
can’t fall, or can’t collapse anyway — although that’s the way housing
prices usually go down. They are still being conditioned to believe that. What we have, then, is a stand-off, sellers
demanding something close to their initial prices and buyers unwilling
to go up, despite a steady drumbeat of commercials and (what’s worse)
TV news stories claiming "now is the time to buy."
It’s not. As in any market, you wait for capitulation. You don’t go buy on the wrong side of a falling knife.
Before you buy, make sure you can easily handle the payments on a fixed, 30-year note. You don’t want that to be more than one-fourth your income. Those are the old rules — during the housing boom we’ve had people paying 40-50% of double incomes, and taking out idiot balloon notes. Those days are over. Let the banks foreclose them.
Better yet, get to your local courthouse, after getting an agreement with your bank on how much you can safely afford. And don’t go over that number, no matter how beautiful the place may look.
The time has come for a reality check in housing. And that is going to be very, very painful to millions of people. TV and newspaper reporters will be sorry a year from now they didn’t cover the story. Instead, they covered it up to please advertisers. And that’s scandalous. They and their editors should be fired. But they won’t be.
