Commentary by John F. Wasik
Jan. 12 (Bloomberg) -- If you were searching for pockets of optimism in the U.S. housing market, where would you look?
Easy guesses would be to avoid Detroit, Cleveland or any cities with domestic automobile plants or troubled manufacturers.
Then there are the foreclosure gulches of Central and Southern California, which include the Modesto, Stockton, Bakersfield, Riverside and Sacramento areas. Those cities will take a long time to recover. Too many homes there were sold at bubble prices to people with dodgy finances.
Most shortlists of regions likely to experience prolonged housing slumps include Las Vegas, Phoenix and South Florida. You may be able to find some bargains there, although that doesn’t mean you will achieve any gains for years to come -- unless demand roars back and supplies are diminished.
Not everyone cares about home-price appreciation, though. People still want to live in safe, stable neighborhoods where services abound, schools are decent and they are surrounded by educated, caring neighbors. To many people, that’s an intangible and worthwhile investment.
Rates on 30-year fixed-rate mortgages now average about 5 percent, after 10 consecutive weeks of decline, Freddie Mac said in a report last week. Where can you be reasonably assured that your housing investment won’t evaporate? Like buying a stock or company, you need to gauge a home’s risks, which many buyers neglect to do.
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(John F. Wasik, co-author of “iMoney,” is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: John F. Wasik in Chicago at jwasik@bloomberg.net
Last Updated: January 12, 2009 00:00 EST