WSJ: 5 Reasons Not to Jump Into the Housing Market

Tuesday, 24 Sep 2013 08:01 AM

By Dan Weil

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The housing market has been on fire since early last year, with the S&P/Case-Shiller Index of home prices in 20 cities soaring 12.1 percent in the year through June.

But Wall Street Journal editor David Crook offers five reasons why you might not want to join the party of homebuyers.

First, "this recovery leaves a lot to be desired," he writes. For example, "existing-home sales are up, but they're still about 27 percent below the figure from mid-2005."

Editor’s Note:
Obama’s Budget Takes Aim at Retired Americans

Second, "the new boom is a rehash of the old one," Crook says. Much of the major housing gains now are coming in the West and South, just as in the housing bubble of the last decade.

Third, "big businesses are doing a lot of buying," he writes. Big-time Wall Street firms, such as Blackstone Group, are snapping up houses.

"Their presence is driving price increases and sales volume even as they frequently outbid individual home buyers."

Fourth, "Investing in housing is nothing like buying a home [to live in]. A market that's good for investors may not be so hot for you," Crook says.

Finally, "interest rates are on the rise," he notes. "At some point, they will rise to levels that eliminate today's home-buying advantages."

To be sure, some participants in the housing market remain bullish.

The National Association of Home Builders/First American Improving Markets Index shows that 291 metropolitan areas count as improving housing markets this month.

"With every state now able to claim at least one county that’s part of an improving metro, ... prospective homebuyers have good reason to be encouraged by this news," says Kurt Pfotenhauer, vice chairman of First American Title Insurance.

Editor’s Note: Obama’s Budget Takes Aim at Retired Americans

Related Stories:

CNBC: We're in Another Housing Bubble

Sam Zell Maintains Cautious View on US Real Estate

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