Why?
1. Because house prices will keep falling in the areas where prices are still dangerously high compared to incomes and rents. Banks say a safe mortgage is a maximum of 3 times the buyer's annual income with 20% downpayment. Landlords say a safe price is a maximum of 15 times the house's annual rent.
Yet in affluent areas on the coasts, both those safety rules are still being violated. Buyers are still borrowing 6 times their income and putting only 3% down, and sellers are still asking 30 times annual rent, even after recent price declines. Renting is a cash business that proves what people can really pay based on their salary, not how much they can borrow. Salaries and rents prove that those high prices will keep falling for a long time. Anyone who bought a "bargain" in those areas last year is already sitting on a very painful loss.
On the other hand, house prices in cheaper areas have now fallen well below the cost of renting. In some places, gross rents exceed 10% of the price of a house. It does makes sense to buy there now. Prices could still fall more if unemployment rises or interest rates go up, but on a month-to-month basis, the buyer of a very cheap house wins. So the housing market is split.
2. Because it's often still much cheaper to rent than to own the same size and quality house, in the same school district. On affluent areas, annual rents are 2.5% of purchase price while mortgage rates are 5%, so it costs twice as much to borrow the money as it does to borrow the house. Renters win and owners lose! Worse, total owner costs including taxes, maintenance, and insurance come to about 9% of purchase price, which is more than three times the cost of renting and wipes out any income tax benefit.
Buying a house is still a very bad deal in those neighborhoods, but it does now make sense to buy in some neighborhoods where prices have already fallen into line with salaries and rents, or even below. Check whether you should rent or buy in your own area with "What's It Really Worth?".
The only true sign of a bottom is a price low enough so that you could rent out the house and make a profit. Then you'll know it's safe to buy for yourself because then rent could cover the mortgage and all expenses if necessary, eliminating most of your risk. The basic buying safety rule is to divide annual rent by the purchase price for the house:
annual rent / purchase price = 3% means do not buy
annual rent / purchase price = 6% means borderline
annual rent / purchase price = 9% means ok to buy
So for example, it's borderline to pay $200,000 for a house that would cost you $1,000 per month to rent. That's $12,000 per year in rent. If you buy it with a 6% mortgage, that's $12,000 per year in interest instead, so it works out about the same.
Owners can pay interest with pre-tax money, but that benefit gets wiped out by the eternal debts of repairs and property tax, equalizing things. It is foolish to pay $400,000 for that same house, because renting it would cost only half as much per year, and renters are completely safe from falling house prices.
3. Because it's a terrible time to buy when interest rates are low, like now. Realtors just lie without shame about this fundamental fact. House prices rose as interest rates fell, and house prices will fall if interest rates rise without a strong increase in jobs, because a fixed monthly payment covers a smaller mortgage at a higher interest rate. Since interest rates have nowhere to go but up, prices have nowhere to go but down.
The way to win the game is to have cash on hand to buy outright at a low price when others cannot borrow very much because of high interest rates. Then you get a low price, and you get capital appreciation caused by future interest rate declines. To buy an expensive house at a time of low interest rates and high prices like now is a mistake.
It is far better to pay a low price with a high interest rate than a high price with a low interest rate, even if the mortgage payment is the same either way.
* A low price lets you pay it all off instead of being a debt-slave for the rest of your life.
* As interest rates fall, house prices generally rise.
* Your property taxes will be lower with a low purchase price.
* Paying a high price now may trap you "under water", meaning you'll have a mortgage debt larger than the value of the house. Then you will not be able to refinance because then you'll have no equity, and will not be able to sell without a loss. Even if you get a long-term fixed rate mortgage, when rates inevitably go up the value of your property will go down. Paying a low price minimizes your damage.
4. Because buyers already borrowed too much money and cannot pay it back. They spent it on houses that are now worth less than the loan. This means most banks are actually bankrupt. But since the banks have friends in Washington, they get special treatment that you do not.
The Federal Reserve prints up bales of new money to buy worthless mortgages from the most irresponsible banks, slowing down the buyer-friendly deflation in prices and socializing bank losses.
Big bank cash flow will never run out as long as the Federal Reserve exists. The Fed exists to protect big banks from the free market, at your expense. Banks get to keep any profits they make, but bank losses just get passed on to you as extra cost added on to the price of a house, when the Fed prints up money and buys their bad mortgages.
If the Fed did not prevent the free market from working, you would be able to buy a house much more cheaply.
As if that were not enough corruption, Congress authorized vast amounts of TARP bailout cash taken from taxpayers, to be loaned directly to the worst-run banks, those that already gambled on mortgages and lost.
The Fed and Congress are letting the banks "extend and pretend" that their mortgage loans will get paid back.