Best Time to Buy a House?

John Paulson said he is optimistic on the American economy. "I think we're at the tail end of the credit crisis," he said "We're in the middle of a sustained recovery in the US. The risk of a double dip is less than 10 percent.” Europe, however, “is the one soft spot in the world," he told an audience at the London School of Economics on Wednesday.

"It's the best time to buy a house in America. California has been a leading indicator for the housing market, and it turned positive seven months ago. I think we're about to turn a corner."

The housing market is probably in its worse shape: Both new and existing home sales have plummeted in June to new lows after the expiration of the federal home buyer tax credit. Mortgage rate has been steadily going down, which is an indication that housing demand is weak and getting weaker. All these are tightly linked to the weak labor market: Private job creation is anemic, and unemployment rate is expetecd to stay elevated for years.

The economy is so dark that economist/columnist Paul Krugman has warned that we maybe entering the "Third Depression."

But if you're a contrarian and you believe in the basic soundness of American businesses, then this is probably one of the best times to take a bullish bet, on housing and on U.S. economy in general.

See this article for the contrasting views of the hedge fund manager Joh Paulson and the academic/journalist Paul Krugman.

I've been looking for a house to buy in recent months as our lease was expiring. There are many good reasons to buy. Prices have been dropping over the last two years, and continue to drop. It's definitely a buyer's market. Renting now costs more in terms of after-tax cash flow. It's a good time to take advantage of the historically low mortgage rates and to start building home equity again...

But, there is no hurry! Unemployment is going to be a long hard problem to solve. Without massive job creation, there is very little real pent-up demand for additonal housing.

But, for the same reason, if job creation is getting in gear and we start to see hundreds of thousands of private jobs being created, a housing boom would not be far behind.