Friday, January 18, 2008

Norris: Maybe Money Would Help

by Tanta on 1/18/2008 10:56:00 AM

Sorry to be so behind today, but I've been staring at these paragraphs of Floyd Norris's for a couple of hours. I still don't quite know what to say. But I'm sure you all do:

The ideal home buyer now — in a reverse of what was true for years — is a renter who is not burdened with a house. Such a buyer will need a down payment from somewhere, and he or she will need enough income to meet the monthly payments for the foreseeable future, including any increase in adjustable rates that seems probable.

But not owning a home, which may be hard to sell, is a big plus.

A year ago, having a home that had appreciated in value meant that an owner could trade up to a more expensive home. Now it means that the homeowner cannot move until the old home is sold, and that is getting more difficult.

First, the seller has to find a buyer who can get a mortgage. Second, the price has to be high enough to pay off the old mortgage and leave enough cash for the down payment on a new home. Both were taken for granted a year ago. In many markets, neither is a sure thing now.
If I'm reading this correctly, the suggestion is that we could use a real economy (one that, say, provides down payments from something other than home sales and income from something other than home sales) to create first-time homebuyers who will buy existing homes from people who want to upgrade into a new home by selling the old home for a profit. Have I been drinking too much cough syrup?