First Time Home Buyers Are The Key!

I read a good article today on the current housing crisis. While none of this information was particularly new news, I thought it would be worth mentioning. It was actually one of the few semi-positive articles I have read on this topic in awhile. The gist of the story circled around the idea that we are at the bottom or at least near it. It is now time for the rebound to start and the First Time Home Buyer holds the key! I know this is a bit obvious and simplistic, but after all the solution to this crisis isn't rocket science. There are just way too many homes out there and not enough buyers. Joe Blow can want to sell his home and buy a new one, but this just doesn't fix the housing surplus does it? A "New" buyer that doesn't have a home to sell needs to arise and save the day. In today's market, this needs to happen millions of times over! Every market is different and the story I read was no doubt talking about a large market like California instead of something comparable to Columbia, MO. Nevertheless it's worth discussing even if it all doesn't apply here.

A couple different factors are influencing First Time Home Buyers right now. These are the elimination of 100% loans (except USDA loans- read Monday's post) and slightly higher interest rates. What better to scare off a new buyer than telling them they must save even more money and their monthly payment will be a tad higher due to the interest rate! However, if they look a bit deeper things may not be so bad! Positive factors to help offset the negatives are the reduced sales prices these new buyers are enjoying and the fact interest rates are still pretty darn good. First Timer's are now able to get into nicer homes that at one time they couldn't afford!

I know I for one bought at the peak of the boom! I didn't get much bang for my buck and had I been in California I would be hurting pretty bad since I would be dealing with such rapid depreciation! Luckily Columbia, MO won't experience this as bad as California! Our Market has been fairly stable considering the mess that is out there! These super deals are not quite as prevalent here, but they are out there to find. I know first hand because we have loaned to several First Time Home Buyer's that have taken advantage of some sweet deals!

With all this being said, if rates do continue to creep higher I may want to re-visit this topic. Higher rates will definitely put a cramp in any deal you get!

In getting back to the article, the rebound being discussed had a few steps that will need to take place over several years.

First, the return of First Time Buyers must shrink a good deal of the new home surplus out there.

Second, these new buyers must turn to existing homes since the new home surplus has been reduced and very few new homes are being built. This is great news for the sellers who are wanting to upgrade to a new home. However, these sellers are taking a hit due to these new buyers needing a deal since there are no new homes to snatch up. The sellers saving grace is that they too should catch a break when they trade up!

Third, new housing starts should start to occur at a slightly higher rate. However, this should be very gradual. It will take a few years to gather steam because they will be competing more than ever with existing homes still selling at a bargain.

Lastly, the surplus of existing and new homes will eventually disappear. This will take several years, but it will eventually happen. Once this finally happens, prices can start to rise again.

As you can see this model sure makes more sense in a larger market that is experiencing larger sales price reductions, but it still makes sense.

I am just keeping my fingers crossed that mortgage product offerings and interest rates stay at reasonable levels. If they don't then this models concept will be the same, but it time frame will surely be adjusted for the worse!

I just wanted to pass this information on. After all it was a positive article instead of another piece of news to keep you down in the dumps!

Your Comments are welcomed.

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