Lessons from the Housing Bubble

July 20, 2009 — -- Have we learned nothing? Real estate Web site Zillow.com just came out with a new survey that shows, despite the real estate bubble and economic crisis, American views about home-buying are still utterly warped. I'm sitting here with my mouth open, I'm so amazed. Here are some of the most astonishing things Zillow found and my reality checks to go along with them.

17 percent of people say they plan to buy a house with zero percent down

Um, good luck with that. Have people not heard that credit has tightened up? In fact, zero-down loans are not available anymore. Probably the best you're going to do is an FHA loan, backed by the government. Even the required down payment on those has gone up – from 3 percent to 3.5 percent.

The average sales price of houses in America is roughly $250,000. So you're looking at a down payment of at least $8,750 – plus closing costs, with that generous FHA loan. A 20 percent down payment makes a lot more sense. Time to start saving up.

55 percent of people say the reason they want to buy a new home is so they can get a bigger one than they have now.

My goodness, I thought the "not-so-big house" was chic right now. Maybe not. Hey, if your family can afford a bigger house in this economy, buy it. The rest of us will thank you for being a one-family stimulus package!

But for those who can't afford it, it's time to get comfortable with more modest living. There's nothing wrong with that. Here's a compromise: fix up your current house. It's a great time to do it. Contractors are hurting for work and willing to drop their prices.

30 percent of home buyers told Zillow they plan to own their next home for five years or less.

Again, experts are horrified. Most real estate watchers are saying you should not bother buying a home these days unless you plan to stay for at least seven years. Why? Because the market is volatile. Prices could go down further. These pundits are trying to give homes plenty of time to appreciate in value, so you can get your money out when you sell.