Young Adults Having a Tough Time Buying.
Experience and a Plan is the Key to Success!
Last newsletter of 2014 gang! Where’d the year go?
Not much has changed since the last time we connected. As you’ll read below, younger first-time buyers are having a tougher time than most out there, but there is hope my friends.
As I always say, it requires a definitive strategy and loads of tenacity to be a successful buyer. It can be done with the right agent. ;- )
Seller alert… I’m starting to see a trend of sellers taking a lackadaisical approach to selling their homes. Even in a hot market, preparation is key for a maximum financial return.
Please have a safe and happy holiday season. Drop some change into those collection buckets and we’ll chat in January 2015!
Till next time…
“My goal is for every client not to question why they chose to work with me,
but to question why they didn’t choose to work with me before.”
Dino Virella’s December 2014 Real Estate Market Watch Holiday Edition
The job market and the economy continue to improve. Mortgage interest rates remain near historic lows. But despite that, the share of first-time homebuyers fell to its lowest point in nearly three decades, according to a new report by the National Association of REALTORS®.
NAR blamed the drop on a number of factors, including younger people carrying more student debt, but the trend could be preventing a healthier housing market from reaching its full potential, economists said.The annual consumer survey additionally found that an overwhelming majority of buyers search for homes online and then purchase their home through a real estate agent, a trend that has been growing over the past decade.
The 2014 National Association of REALTORS® Profile of Home Buyers and Sellers found that 33 percent of buyers were first-timers, down from 38 percent a year ago and the lowest share since 1987. Since 1981, the average has typically been about 40 percent.
NAR’s chief economist Lawrence Yun cited a number of obstacles young adults are facing on the road to homeownership. “Rising rents and repaying student loan debt makes saving for a down payment more difficult, especially for young adults who’ve experienced limited job prospects and flat wage growth since entering the workforce,” he said. “Adding more bumps in the road is that those finally in a position to buy have had to overcome low inventory levels in their price range, competition from investors, tight credit conditions and high mortgage insurance premiums.”
Yun said that stronger job growth should eventually lead to higher wages, but he added that tight credit and the mortgage application and approval process continue to be a hindrance for young buyers. “Less stringent credit standards and mortgage insurance premiums commensurate with current buyer risk profiles are needed to boost first-time buyer participation, especially with interest rates likely rising in upcoming years,” he said.
What wasn’t highlighted in the report is the significant role that escalating home prices in markets like the Bay Area plays in the decline of first-timers. But perhaps that goes without saying.
Tremendously low inventory has served to keep prices moving significantly higher in many of our markets, even in the entry-level category. My hope is that if we begin to see inventory levels loosen up and return to normal, that could help keep prices within reach for our young adults – and give them a better chance to enjoy the American Dream of homeownership.
Below is a market-by-market report from our San Francisco Bay Area offices:
Menlo Park reports that inventory is very low and very few listings seem to be coming. The pressure on buyers is enormous and we do not see where enough listings will be coming from. There is no doubt that Silicon Valley is in the midst of a unique renaissance and no one knows how long it will last.
Palo Alto says overall inventory is at a historic low. However, our office has been successful in a number of multiple offer situations.
Redwood City & San Carlos reports an extremely quiet time in the market place. Lack of inventory is causing the sale price of properties to continue to escalate when there are multiple offers. There always seem to be several all cash offers. Our office did close one transaction last week that was an all cash $160,000+ over asking and a five day close. It’s a very unpredictable market.
Woodside-Portola Valley says inventory is just about non-existent. There just are very few new properties.
San Francisco – Picky buyers and recalcitrant sellers have slowed down the pace a bit. At the same time, most transactions have multiple offers. Some agents are helping their clients negotiate by keeping an eagle eye on listings that have not sold after one or two weeks. Agents are noting that as we approached Thanksgiving, the inventory of new listings had taken a definite decline. However, buyers are still out there, and most homes that ratified during this period did so with multiple offers (ranging from 2 to 8). One agent unsuccessfully offered on an under-priced condo in need of remodeling/updating, and found themselves up against 21 offers. With some exceptions, the sense is that most sellers are now shifting into holiday mode, and will be holding offer their properties off the market until next year.
North Bay – The market is experiencing a slight slowdown but still fraught with lack of inventory, making it very difficult for those buyers who want to close on something by year’s end. Agents are seeing more deals that were multiple offers falling out of escrow. It seems buyers are eager to jump in and sometimes experiencing a quick buyers’ remorse. Open houses are still seeing lots of activity. The luxury market is still steady and good properties are receiving good activity and sometimes multiple offers.
Open homes are still well attended with a lot of out-of-the-area buyers looking in Sonoma County.Country properties one acre and up are in demand. There’s been an uptick in buyers searching $900,000 -3,000,000 range.
San Rafael reports that the market is having an end-of-the-year rush. Usually at this time the market starts to fall off but this year after quite a few slow weeks we are seeing an increase in sales, which is a-typical for this market.
Santa Rosa notes that the local market is active, with some signs of a seasonal slowdown. There are multiple offers on the most attractive, well located and best-valued properties.
In Southern Marin, the local market has started its seasonal slowdown as evidenced by fewer listings coming onto the market. However, agents are still experiencing over 50% multiple offers. The most desirable properties are receiving multiple offers and then the numbers drop way off for dated inventory, overpriced property and homes is poor to fair condition. The luxury market over $3 million is steady.