New Home Buyers Discouraged

As a residential real estate broker who works with lots of new home buyers, this market is really leaving a bad taste in their mouth.  Lengthier escrows and higher costs/fees are really discouraging new home buyers from purchasing their first home.  The economical problems of the greater economy are clearly evident in the home buying process.

Many new home buyers are finding the current home buying market to be quite challenging and stringent.  In the case of short sales which represent much of the home inventory, banks are not willing to compromise at all --- as is, no repairs, no termite, and long waiting periods for any sort of contract deviations.  As a result, these homes are quickly filtered out by new home buyers who may not be willing to take on the associated risks, wait 3-4 months for processing, or are not prepared to take on major home remodels.  This leaves them to only consider standard or as termed today equity sales.  Standard sales present their own set of challenges in today's economy but provide greater flexibility for the new home buyer.  While appraisal costs have risen about 30% from a few years ago ($350 to about $500 now) and escrows can no longer be closed in 30 days (more like 45 days), standard sales still allow the buyer/seller to go through the standard negotiations. 

So, is this really the time for a new home buyer to be looking for their new home or is this market better left for investors?  This is a question many new home buyers are currently contemplating.  I constantly get the following questions:

1) Are home prices going to fall further?

2) Is this the right time to buy a house?

3) Do I get a better deal in buying a short sale or REO?

4) Where is the housing market going?

All good questions for which I would like to have the answer!  But, truth is we don't really know whether the bottom is here, whether the recovery has started, or what other issues may be lurking.  Today's in flux market presents tremendous challenges in evaluating not only the price of a home but whether it will retain its value.  Given the slump in the housing market, new marketing ideas have surfaced.  Auctions, short sales, etc. do present opportunities for savvy investors or home buyers who do their homework in determining the price of a home, but at the same time they don't guarantee that you will get a deal.  At the end of the day, it all comes down to evaluating the prospective home on a few key items:

1) Can I comfortably afford the home?

2) Do I need a home to accommodate my growing family?

3) Do I want stability for my family that includes good schools, stable house payment, home ownership to be part of a community, etc.?

For first home buyers, the priorities should not be based on making money, but rather finding that first home to start a family or call your own.  Whether you are in the market for that great income property or your first home, stay focused and take the time to understand everything you sign --- in the end you control the outcome.  Happy House Hunting!

This author consults with leading institutions through GLG