probably the key piece of data was this projection ... with an even more interesting piece of data being that the 'bottom' in some real estate markets may not occur for two or three more years !
The reported story about this study is entitled 'The Shifting Calculus of Buying a House' ( at ). However, the article doesn't go into that Calculus to make the obvious point ....
In a city where real estate values are likely to drop in the future, in the early years of a mortgage the mortgage payment is now basically just a rent payment. The reason of course is that a huge percentage of early year mortgage payments go for paying interest, with only a tiny percentage going towards paying down principal. But in markets where real estate values are likely to drop in the future, the tiny percentage of mortgage payments being applied to principal do not build any equity, since the market price of the house will decline just as fast or faster than the mortgage payments to principal will reduce the outstanding mortgage 'balance'. To complete the calculation, one must add in the other costs of home ownership i.e. property taxes, insurance, upkeep etc. to the monthly mortgage payment.
When compared to the cost of renting, in the vast majority of cities the cost of renting is now significantly less expensive. Thus many would-be home buyers are now deciding to pay rent and 'sit on the sidelines' to see what happens to housing prices over the next 2-3 years. This of course creates a self-fulfilling prophecy in regard to declining real estate prices, as more and more 'motivated' and 'distressed' would-be sellers have fewer and fewer willing buyers.
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