Houses are cheaper, so why aren’t you buying?

By the final week of December, holiday sales appeared to fall short of modest growth expectations.

"Clearly a negative psychology pervades consumers, which has hurt home buying," Baumohl said.

Even for home shoppers willing to buy now, stricter mortgage requirements have made it harder for many to qualify for loans. Many national lenders and banks like Wells Fargo & Co. and Washington Mutual Inc. have scaled back their mortgage lending to borrowers with questionable credit because they know they won't be able to resell the paper to Wall Street firms and others in the securitization market.

"Housing affordability has changed in dramatically different ways for different borrowers," said Douglas Elmendorf, an economist at the Brookings Institution.

"The change in affordability depends crucially on your credit history, how big a house you want to buy, and where you want to buy it," he said. "The first two points are more important now than they have ever been in the past."

For example, interest rates on so-called jumbo mortgages — home loans for more than $417,000 — are slightly higher than six months ago. Because Freddie Mac and Fannie Mae don't buy mortgages with loan amounts that high, lenders are wary of originating them, worried no investor will buy them.

Interest rates on mortgages to consumers with spotty credit are sharply higher these days as delinquencies and foreclosures on these loans have skyrocketed, scaring off both lenders and investors.

For many borrowers, exotic subprime loans featuring adjustable rates, interest-only payments or short-term teaser rates were viewed as the only way they could afford to get into the housing market. But soaring monthly payments have led many to default, and most lenders no longer offer these types of mortgages.

"It will be more difficult for people with poor credit histories to get mortgages in the next five years," Elmendorf said.

But market conditions are looking better for buyers with better credit scores and the cash for hefty down payments. For them, interest rates on conforming, prime 30-year fixed rate mortgages are the lowest in six months and lower home prices are available in most areas of the country.

Mortgage giant Freddie Mac reported Thursday that interest rates on 30-year, fixed-rate mortgages averaged 6.17 percent in the week ending Dec. 27, down from 6.74 percent in the middle of June.

Ben Pedraza took advantage of the current mortgage market and seller's desperation to snag a four-bedroom brick home in Duncanville, Texas. He paid $30,000 less than the asking price on the house, which sits on a half-acre wooded lot and features granite countertops, a hot tub and a six-person cedar sauna.

With a credit score around 785 and a steady job as a network administrator for an engineering company, the 33-year-old qualified for a 30-year fixed rate loan from Coldwell Banker with only 3 percent down on the $235,000 brick home. He moved in last month.

Pedraza plans to live in the house for at least 10 years, growing into a home that is more than he needs now. He thinks he'll ride out the current housing downturn and, when he finally wants to sell, the timing will be right.

"I think I got a great deal as far as the house," said Pedraza. "I think once the market picks up, I'll have instant equity."

MORE FROM TECHNOLOGY & MONEY

Technology & Money Section Front

Your shopping type: Black Friday? Cyber Monday? Can your name affect your career? Is Black Friday really worth the effort? 10 tips to find seasonal work this year   Experts share financial advice   Stop holiday overspending before it starts   Is the recovery real on Wall Street?   Study: Wall St. execs cashed in before collapse Long-term unemployed face dwindling options Just because it’s on Twitter, it (still) isn’t true Technology & Money Section Front   Add Technology & Money headlines to your news reader: