Wednesday, May 21, 2014

A Housing Market? Not. What's a First-time Buyer to Do?

If you invest in stocks and the Dow drops for a few days, you'll convince yourself it's been that way for weeks and will be that way forever.

If you follow a baseball team and it hits a losing streak, you'll convince yourself it's been that way for weeks and will be that way forever.

If you want to buy a house and keep getting shut out for whatever reason--escalating competitive offers, nothing listed in the school zone you want, whatever--you'll convince yourself it's been that way for weeks and it will be that way forever.

Here's the biggest difference among the three: With housing, it's really true. That's because there is no housing market to speak of, and there won't be for a pretty long time. Of course, micro-markets exist hither and yon, but the 2014 housing market has yet to gain traction. This article from Housingwire explains part of it--an abysmally low number of homes for sale--but doesn't get into another reason: Too many existing homes are Baby Boomer-owned, and Boomers don't want to sell. There's really nowhere to move to even if someone did come along and buy their older, non-updated houses.

Other reasons abound. Family formation is down and too many people of first-time buyer age drag around a ball and chain of student loan debt. In some states, foreclosures are on the rise again. While unemployment is trending down, income is, too. It also seems to me that so many jobs in 2014 don't have any security attached, even though I have no data. Why apply for a mortgage if you worry about being a pink-slip stat next year?

The fact is, sales for the year are down and prices are up, and I won't get into the Picketty thing. And did I say it's still hard to get a mortgage? It's a hugely competitive world out there, not just for buyers, but lenders, home inspectors, title and escrow offers, and real estate brokers.

What's a buyer to do?

If I were a buyer right now, I'd get an address list of a bunch of homes in a neighborhood I liked, and then send every owner a letter telling them I was in the market. As an owner of many homes over the years, I can assure you that real estate brokers send such letters all the time. The only difference between you, a buyer, doing it and a broker doing it is that you really do have a hot buyer--yourself.

Be sure to get a pre-approval letter from a lender before actually sitting down with a seller. And I recommend professional help navigating these home-purchase waters. To a lay person, the lingua franca of real estate people sounds very much like English, but the people of the real estate world string the words together in ways that seem mystifying.

Get proactive, and the frustration over home buying won't be that way forever anymore.

Thursday, May 1, 2014

Why Give Right Reasons When Wrong Ones Are There?

When the tobacco companies paid for studies saying no link existed between lung cancer and smoking, did people believe them?

If the contractor who does your home inspection includes a bid to do the repair work along with the inspection report, would you give your head a skeptical scratch?

When a mechanic tells you your car is kaput and then offers to buy it, wouldn't you roll your eyes and sidle towards the door?

Someone please tell me, then, when a real estate agent tells you now is a great time to buy a home, why does he or she think you'll believe it? When was the last time you ever heard one say now is not a good time to buy?

Having once been a real estate agent, I can sympathize with them. Many work pretty long unpaid hours, spending a lot of time on clients who aren't that serious, who think their homes are worth more than they are, who make absurdly lowball offers in competitive markets, or who just turn to another broker to write the offer for no apparent reason.

In other words, if no one buys a house, brokers don't make any money. That's arguably not optimal in 2014 America. Why not tout home ownership at every opportunity?

But still. Isn't a little authenticity in order? I recently read a real estate broker's article in Realty Times which said that people who bought at today's low rates and low prices would build up equity in four years and get money back when they sold, unlike the hapless renter schmucks who forked the monthly payment into the landlord black hole. Moreover, the article intoned, there are all those tax benefits from owning a home.

I've heard the same arguments for more than thirty years. Rates are always low and about to go up. Same for prices. National Association of Realtors economist Lawrence Yun touted the opportunity of home ownership in 2006, and was still doing it in 2009. And oh, those tax benefits!

Did the writer of this article miss the memo on the number of underwater homeowners? And how about the niggling little point that more than seventy percent of homeowners don't itemize on their tax returns, and therefore don't use the tax benefits? I'll give this writer a tiny bit of credit, though. She didn't call a home an "investment," which these broker-writers generally do.

Sometime, I'm going to write a post on five compelling reasons to own a home. None of them will be equity buildup and none will involve tax benefits.

And someone just might actually believe it.