By Michelle Singletary
Thursday, March 30, 2006
I have a dear friend who recently put her townhouse on the market. It's a lovely home. But my friend is worried because the house hasn't sold.
It's been on the market for about eight weeks.
"We waited too long," my friend lamented. "Back in the day, three to four months on the market wouldn't be a big deal. It's just that the market was so fast recently that it seems so slow now."
As the weather warms around the country and the high season for home selling begins, I know a lot of other people with homes to sell will be sweating like my friend.
So is the housing market bursting its bubble?
This is a question being asked by folks looking to sell and those in the market to buy. It's certainly on the minds of those who dream of homeownership but don't have the funds to do anything but dream.
If you're not sure what to do in this real estate market, I suggest you pick up the Color of Money Book Club selection for April. I'm recommending "House Poor: Pumped-Up Prices, Rising Rates, and Mortgages on Steroids" (Collins, $21.95) by June Fletcher.
Fletcher, a reporter for the Wall Street Journal, has been writing about real estate and home-related issues for more than 20 years. She also writes the weekly House Talk column for Realestatejournal.com, the Journal's online real estate section.
I've been looking for a real estate book to recommend for a while now. But too many are written by folks who are so tied to the industry they can't be objective or they overly promote (recklessly in some cases) the prospect of anyone and everyone getting Bill Gates-rich buying and selling real estate.
"House Poor" is different. In fact, on the cover of the book Fletcher promises tips to "survive the coming housing crisis."
Consider this: Mortgage interest rates have been climbing. In early March, the average contract rate for 30-year fixed mortgages increased to 6.42 percent, the highest level since July 2002 when rates averaged 6.46 percent, according to the Mortgage Bankers Association.
In many areas of the country, homes are staying on the market much longer than in recent years. Home prices are coming down or aren't rising at rates that would make one's pacemaker falter.
"It all seems so unstable, even experienced real estate investors are becoming nervous," Fletcher writes. "We are right to be worried. Though housing has been the engine driving the economy since the beginning of this decade, it could also slam on the brakes."
Fletcher isn't an alarmist. She's a reporter with a realistic and balanced view of the housing market. She wrote the book in the summer of 2005 so, of course, some of the statistical information is already dated. But her conclusions and cautions are not.
For example, Fletcher walks readers though the agonizing and often frustrating decision of whether to continue to rent or buy. She understands that many people can't afford to buy and so they feel like failures because they have to rent.
Her advice if you are in this position is so sound and reasonable:
"But to every thing there is a time and a season, and that's as true for home buying as it is for everything else," Fletcher says. "The people who win big in the real estate game are the ones with the courage to sit out the manias as the markets reach their peaks and buy during the busts."
The real issue isn't whether you will be stuck being a renter all your life, she says. It's whether you'll get so scared about being shut out that you'll buy at the market's peak and be stuck in a property you can't afford or sell.
One of the best neutral calculators on whether it's best to rent or own can be found at http://www.mtgprofessor.com/ , Fletcher advises. The site is run by Jack Guttentag, professor emeritus of finance at the University of Pennsylvania's Wharton School.
We all need some perspective when it comes to the home we own or dream of owning. Unfortunately many people see a home as their financial salvation, Fletcher concludes in her epilogue.
"Our home's address isn't Easy Street," she writes. "It's simply a place to live, and a solid investment over time -- if we can afford it, don't overpay, make smart improvements and don't get caught up in risky financing schemes."
If you are interested in discussing April's book selection, join me online at 3 p.m. April 28 on http://www.washingtonpost.com/ . Fletcher will be my guest and will take your real estate questions.
To become a member of the Color of Money Book Club, all you have to do is read the recommended book. Then we chat online with the author. In addition, every month I randomly select readers to receive a copy of the book, donated by the publisher. For a chance to win a copy of "House Poor," send an e-mail to email@example.com . Please include your name and address so we can send you a book if you win.
· On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online athttp://www.npr.org.
· By mail: Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.
· By e-mail:firstname.lastname@example.org.
Comments and questions are welcome, but because of the volume of mail, personal responses are not always possible. Please note that comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.