Doom + Gloom = Time to Buy?

Once again all the economic headlines today are glum. The Consumer Price Index was down 1.7% and flat when you exclude food and energy. This is the largest decline since they started seasonally adjusting the number in 1947. Housing starts also set a record today by dropping 18.9% to the lowest level since they started keeping track in 1959.

Of course this is all bad news for the larger economy. However, there are some glimmers here for housing. First, the CPI numbers hint at deflation and certainly show no signs of inflation, which is the best possible news for mortgage rates. Rates have been falling lately and this news makes it likely that they will continue or at least hold steady at these low levels.

Housing starts indicate that builders are not very confident, and less construction will mean painful job losses. In the long term it also means fewer new houses going into an already glutted market. Inventories of unsold homes are a big part of the problem with the housing market, so fewer new homes means at least we're not adding to the problem.

All this gloom does create an opportunity for buyers. Prices are low, there's plenty of selection, and mortgage rates are great. If these factors are enough to bring first time buyers into the market it could go a long way to fixing the housing market. Locally we are starting to see some of the first time buyers who had been priced out of the market during the peak.

Years from now I imagine people will be looking back thinking "if I'd only bought back then..." Aside from the investment angle, housing is actually affordable again for people living here in Southern Oregon, which was really not the case when prices were high. Sure, people who owned a home could sell it and buy another, but the new buyers were almost all from out of state. Now, between the prices and the rates, may be time again for renters to become buyers.