Yesterday I was sitting in an open house at a new listing in a great location and in fabulous condition for less than $200,000. That is a real deal in my market area. I remember thinking that a few years back this place would be mobbed. It is perfect for a first-time buyer or a professional couple. Yet I had only a handful of people though and one couple said "I absolutely love it but I'm not gonna buy it."
This seems to be the prevailing attitude that we need to overcome today. It appears as though first-time buyers are more afraid than excited about the prospect of owning a home today.
Really, can you blame them? Yesterday at that same open house I read an article in the Washington Post that said the government is proposing new mortgage finance rules that would make it so that a first-time buyer would need a minimum of 20 percent down to get the best rates for a conventional mortgage and they are proposing more stringent debt-to-income limits. View the article here http://www.washingtonpost.com/realestate/proposed-federal-rules-would-drive-many-out-of-market-for-home-loans/2011/04/04/AFrcop2C_story.html
No wonder first-time buyers are not in a buying mood. As of April 18th FHA loans are going to cost more money as well because mortgage insurance on those loans is increasing. FHA loans now cost more money and buyers can now afford less house. Read more here http://www.walidmrealtor.com/2011/04/07/april-18-2011-fha-insurance-becomes-more-expensive-for-buyers/
I understand the quandary we are in. I have seen buyers take out FHA loans and they don't even have enough money to buy appliances for the new home, never mind face the economic realities of our times. They certainly don't have three to six months of savings in the event that someone loses a job or becomes ill. Then we see defaults in large numbers and we wonder why.
However, there has to be some middle ground and making a first-time buyer have a 20 percent down payment will likely dampen (if not kill) first-time buying even more.
I liked the NAR ad I recently saw on TV. It stated that for every two homes sold a job is created. Home sales are critically important to our economy and yet we are scaring first-time buyers to death and discouraging them from entering the market. Here are some more NAR statistics:
- Home sales in this country generate more than 2.5 million private-sector jobs in an average year. For every two homes sold, a job is created.
- Each home sale touches dozens of different professions.
- Every home purchased pumps up to $60,000 into the economy over time for furniture, home improvements, and related items.
- Housing accounts for more than 15% of the Gross Domestic Product, making it a key driver in our national economy.
- Housing has led this country out of six of the last eight recessions.
I must say that I am concerned about the chill I am feeling from first-time buyers. In my eleven years I have never seen a less enthusiastic group of clients.
As realtors we know what our job is. We can show a client that in many cases it costs the same or less to buy a home than to rent. We can tell them that houses are more affordable than ever due to low rates and low prices. And there is always the emotional aspect of owning a home. We feel achievement, pride and a sense that we have made it when we own a home. But the message needs to come from other places as well. Hopefully the government will realize that by keeping first-time buyers out of the market, they are inhibiting our economic recovery.
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