Slideshows | August 15, 2012

Can you trust the headlines on housing?

Entering the housing market is a hugely popular goal – sometimes for lifestyle reasons, sometimes for financial reasons.

Either way, it pays to be informed. But news stories about property and mortgages can be confusing. Our slideshow offers some helpful tips to look behind the headlines.

 

1

Remember the individual

When researching whether to buy a home, house price reports are often one of the first ports of call. But remember most of us will buy a single home and the price of a one house can fall or rise by much more than the average. So treat house price reports with caution.

2

It’s all relative

Even if house prices have fallen, property may not be the exceptional bargain some expect. Remember, everything is relative. Take average wages into account as well as how much it costs to rent. This provides an idea of what is ”over valued” and what is not.

3

Patience may be a virtue

The eZonomics article What is … availability bias explains how vivid headlines can cause us to overact, encouraging the view that buying (or selling) is urgent. Top tip: Don’t be swayed too much by the headlines. Find a solution that fits your own situation.

4

High returns?

Economist Chris Dillow blogs provides useful insight on the economics behind asset pricing. He says that, financially-speaking, housing returns need to be higher than returns on shares to be worth the risk. Why? Because greater risk should get a greater reward.

5

More than meets the eye

Fact: Most housing indices are based on sales. So in a slump, unsold homes languish on the market and are not included in the statistics. This means the housing indices may present a rosier picture than the market reality.

InvestingHouse buyingTipsHouse prices

eZonomics team
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