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.