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In the height of bailout fever last fall, I wrote a story addressing some potential stakes of the various mortgage rescue plans under lawmaker consideration here and nationally.

I think it’s always important to remind ourselves that beyond the throngs of underwater homeowners, there are others who stand to have their futures dramatically affected by government intervention in the housing market.

In that story, criticism of the various plans — some of which have begun to be implemented — ranged from those who worried that a bailout would entice people to quit making their payments to renters concerned that their tax dollars would go to artificially prop up a housing market that had seen prices soar unsustainably this decade because of easy-to-get loans.

In the story, I talked to Lesley McAllister, an assistant law professor at the University of San Diego. She and her husband and two kids rent a home in Mission Hills. They made the decision to rent and not buy — even though they were homeowners in Northern California before they moved here three years ago — during the boom, when prices were exploding.

People like the McAllisters and the Survival reader who moved to Wichita, often see home price declines as a good thing: a sign of a market on its way to a point of equilibrium. Even though prices are down 42.3 percent from their peak in November 2005, the local Case-Shiller index reading shows prices are still 47 percent higher than they were at the start of 2000.

Here’s a bit from that story:

If prices keep falling, renters such as McAllister anticipate they’ll be able to afford a house with a traditional mortgage, without stretching themselves to the limit or banking on future appreciation to make homeownership attainable.

Their voice was drowned out by the drumbeat of housing frenzy, and they dread being overshadowed again. They fear government plans to keep homeowners in their houses will unnaturally keep prices at unaffordable levels in some places. By helping homeowners stay in homes they could’ve never afforded without using exotic loans, governments might artificially buttress prices that have further to fall, McAllister said.

I checked in with McAllister last week to find out if she’s begun to search for a home to buy. She wrote back this note and gave me permission to share it with you:

We are still renting. We don’t think that prices in Mission Hills, where we think we’d like to buy, have come down enough. Rents have actually come down such that you can find a pretty nice [three bedroom, two bath] to rent for $2,500 or so. But sellers still seem to think they should be able to get $1,000,000 plus for a similar house.  And just today a seller listed a house that they bought for $1.285 million in February 2007 for $1.475-$1.525 million (15% more). Until purchase prices come more into line with rents, we’ll keep renting!

Are you in the same camp as the McAllisters? What signs are you watching in your neighborhood that will tell you it’s time to buy? Anyone planning to rent long-term? Why? Leave your thoughts in the comments below (if you’re reading this in Survival, if not, go there), or you can always drop me an e-mail at kelly.bennett@voiceofsandiego.org.

KELLY BENNETT

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