This is way to much of a generalization...a blanket statement like that does not fit all areas of the country at this time. There are plenty of places that have already dropped 20-30-40-50% in value. A first time home buyer, locking in at 5% getting 8000 back, and assuming they are not flipping the property, can not go wrong in certain areas.
Yes, this was addressed in the next paragraph. You live in Ottosen, Iowa and want to buy a home? Go ahead. Your economy is immune from the rest of the nation.
For the 76% of the people who live in urban areas, purchasing a home is downright stupid in most cases. The places that actually lost the 20-50% in value that you described are actually the places where there's still a long ways to come down.
The entire midwest, the south, and the west are in terrible economic conditions. These states have over 10% unemployment. If you have no job, even with prices getting back to normal, you won't be able to buy. Detroit is a perfect example. Homes are being given away. Makes sense to buy vs rent, but no one can buy because no one has any jobs.
The places where the bubble boomed are the places where there's still a ways to come down. California, Arizona, Nevada, Florida, these places have already fallen a ton. Case-Shiller has Los Angeles down 30% from it's peak, and it's still got a LONG way to go to come close to any kind of affordability.
The price-rent ratios make no sense in most areas, there's a ridiculous amount of growing foreclosures, no one can get loans because no one has a job, there's a HUGE amount of shadow inventory, moratoriums are expiring releasing homes to the market, there's no free market right now because of the government intervention in the bailout and the low interest rates artificially keeping prices up, homes have to lose 40% or more in some areas to match rent prices that are falling as well, the nation has record unemployment, all pointing to what economists are predicting as another crash coming.
But yet morons listen to a realtor and think "Wow, $8,000!? I need to buy buy buy!" These are the same people responsible for the collapse in the housing market. They don't understand simple economics.
