Sidelined home buyers frozen by fears

By Julie Haviv

NEW YORK (Reuters) - Home prices have plunged by 10 percent or more in some parts of the United States and interest rates on mortgages are at enticing levels, but many potential buyers are waiting for prices to fall further.

This psychology is helping prevent the hard-hit home market -- suffering one of its worst downturns in history -- from recovering, just as the spring, the peak home buying season, gets underway.

Rochelle Getzler, a housewife in Nassau County, outside New York city, and her husband, Abraham, have been on the fence for nearly a year, waiting for an opportune time to buy.

"I think it is too risky to buy right now," she said. "Yes, prices have come down, but they have come down from extremely high levels."

As is the case with a growing number of Americans, the Getzlers are also feeling the pinch of a weak U.S. economy: Abraham lost his job of over 20 years as a computer technician due to his company's efforts to cut costs.

Sharply higher gas and oil prices are also taking a toll on their monthly expenses.

"We have little wiggle room right now," she said.

But for the Getzlers, patience is a virtue.

"I think home prices are going to continue falling, so I see no compelling reason to buy a home right now when we can hold off and buy at a lower price later this year or early next year," she said.

Economists tend to agree. Housing markets in some parts of the country will suffer drops of more than 30 percent before the housing crisis is over, according to a report in December by Moody's Economy.com.

In Nassau county, where the Getzlers reside, and neighboring Suffolk county, prices peaked in February, 2006, should reach a trough in February, 2009, according to the report. In that time, they are expected to have fallen by 16.4 percent.

Punta Gorda in Florida and Stockton in California are the hardest-hit markets, with declines from peak-to-trough forecast at 35.3 percent and 31.6 percent, respectively, according to the report.

In 2008 alone, prices are forecast to drop from 1.2 percent to 7.7 percent, according to a report by Deutsche Bank.

The report forecast peak-to-trough declines of at least 9.8 percent, and perhaps as much as 29.5 percent, on average for 100 metropolitan areas in the United States.

Many regions succumbing to lower home prices were the biggest gainers during the housing market's heyday. Home builders overbuilt in these regions and speculators went on a buying frenzy, with lax lending standards stoking the flames.