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Obama Can't Quickly Raise Homebuyers' Hopes

Prospective buyers unsure if this is their moment

By Broderick Perkins

November 9, 2008

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Homebuyers are not so sure that this is their moment.

They haven't given up on the dream, but as the curtain rises on a historic presidency, homebuyers are not celebrating their place in line behind homeowners waiting for relief.

President-elect Barack Obama has long been a staunch advocate of federal assistance to help homeowners avoid foreclosure.

But that doesn't convince most homebuyers that the nation's new leader can immediately improve opportunities to buy a home.

The overwhelming majority of new federal, private and business relief efforts have been focused on the homeowner, not buyers.

Home buyers understand problems that weren't created overnight won't be resolved that quickly, even by a new, charged-up president elected on the promise of change.

And Obama gets it.

"I do not underestimate the enormity of the task that lies ahead. I have said before and I will repeat again, it is not going to be quick and it is not going to be easy for us to dig ourselves out of the hole we are in," Obama said recently, during his first press conference as president-elect.

The focus of his comments was an economy in shambles, but the housing sector has been a wreck too since lenders pulled the rug out from under homebuyers.

Homebuyers nervous

Earlier this year, the majority of homebuyers, 56 percent, believed the housing market would not improve once the U.S. had a new president. That's according to a Harris Interactive survey commissioned by Move, Inc., the operator of the Realtor.com Web site.

Most homebuyers, 81 percent of them, said they were nervous about their prospects in the current housing market. Their anxieties were based on barriers they said existed between them and home ownership. Barriers included, the cost of a down payment, insufficient income and home prices.

Toss in how difficult it is to qualify for financing these days and it's easy to see why most homebuyers are so bummed. Economic conditions have crushed consumer confidence.

The Consumer Confidence Index, which represents consumer sentiment about the economy, crashed from 61.4 in September 2008 to 38 in October, a record low for the 41-year old survey, according to the Conference Board, a private research group.

Why are consumers so glum about the economy? For one thing, housing costs have gotten brutal.

Brutal costs, anemic income

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The Center for Housing Policy, says in ten years ending in 2006, on average, all major categories of homeowner expenses increased faster than incomes.

Rents were up 51 percent, mortgages 46 percent, utilities 43 percent, property taxes 66 percent, and homeowner insurance 83 percent, according to the center's new "Stretched Thin: The Impact of Rising Housing Expenses on America's Owners and Renters."

Meanwhile, homeowner incomes increased by only a comparatively paltry 36 percent. Renters' wages rose about 31 percent.

The squeeze didn't let up in 2006. Large increases in heating, transportation and food costs have further tightened the cost-of-living vice and put a stranglehold on family budgets.

Obama insisted during that first press conference that it's critical to "help hard-working families" but many homebuyers found little comfort in comments that don't answer the question, "When?"

Unfortunately, the new president isn't making any time-tagged promises because he can't. A housing market quantum leap -- or two -- is necessary before homebuyers enjoy happy days again.

• Urban Land Institute's "Emerging Trends In Real Estate 2009" says don't expect housing prices to bottom until late 2009, but concedes even that could be a tall order.

The report surmises a 2009 bottom will arrive only if distressed properties have moved through the system, only if lenders loosen the purse strings, only if interest rates cooperate and only if there are more job and wage gains for the year.

"We need to move back to pricing levels from 2003-2004 before a floor establishes," according to the report.

• Real estate trends guru Stefan Swanepoel, previewing his yet-to-be published "Swanepoel Real Estate TRENDS Report 2009" says "2009 will be pivotal," but not necessarily the bottom.

The report says housing will be more affordable, at the expense of buyers who purchased during peak market "and must endure at least another year of home price declines."

Move-up buyers, says Swanepoel, will stick to the sidelines and wait for the bottom of the housing market "which may not materialize until after 2009."

• Deadline Newsroom's unscientific "When Will Housing Recover?" survey of blog visitors, found that among 237 of those who voted since early this year, 20 (8 percent) said housing would recover in 2008; 62 (26 percent) said 2009; 84 (35 percent) said 2010; and 71 (29 percent) said housing won't recover until later than 2010.

None of this means consumers have given up on homeownership, nor should they.

More than half of renters who plan to buy a home someday will do so in the next five years. Among current home owners, 41 percent plan to buy again, the study said.

And consumers will sacrifice to put their own roof over their head.

Nearly 80 percent of consumers Harris surveyed would be willing to save more, earn extra income, compromise on neighborhood features and skip some home amenities in order to buy a home right now.

That's all pretty much what buyers were doing before the boom.

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Broderick Perkins parlayed 30 years of old-school journalism into a digital real estate news service, the DeadlineNews Group, offering "News that really hits home!"™. The Silicon Valley bootstrap includes the Web site DeadlineNews.Com and the back shop Deadline Newsroom. Contact him at news@deadlinenews.com.

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