The first new casualty in the housing wars has appeared... and it isn’t the one we wanted at all. By all accounts the first to fall by the wayside in the current cycle of the housing market is... TA-DAA ...the first-time homebuyer! Well that certainly sucks, doesn’t it?
More and more, our market is swinging toward the investor/cash buyer over the first-time buyer for one simple reason - CASH! Money talks and the rest of it walks. Is that bad? Well, it’s too bad if you’re one of those folks trying to buy your first home but not necessarily a bad thing. After all, over 70% of current buyers plan to be owner-occupants and that’s good. Just because they have cash doesn’t necessarily equate to investors and rentals - although savvy investors are in the market too. But the lion’s share of it is people who’s timing was inspired. They got out near the peak and rented for a couple years. Today they can buy their old house back for half-price or buy a nice new spread for the same price. I feel for the 1st timers. There was a brief window there when they ruled the streets but with the current shortage of inventory that window has closed, at least in some markets. Imagine if you’re the bank and you’ve just listed a 2,000 SqFt place for $189,000. The first two days your agent gets 67 offers, many of them higher than asking price and nearly 1/3 of them from cash buyers. Well what are YOU going to do?
On the one hand you have your first time buyers who are scraping together the FHA Down, they need closing costs paid, they can close in 45 days and they’re offering your asking price. On the other hand you’ve got a family who sold in 2006, banked the profit so they’ve got cash or close to it, they can close in 20 days and they’re offering $20,000 over asking price. Even the banks in their current stupor can make that decision handily.
Sorry Mr. & Mrs. 1st Timer. Try writing another 20 offers hoping you’ll get lucky. And actually, that’s not bad advice. If you persevere you WILL eventually succeed–if you give up you definitely won’t. In the past 120 days nearly 17,000 homes have had their Notice of Default filed in Riverside County. Over 7,000 REO’s sold during that same period but most of those fielded multiple offers. Our inventory of existing homes for sale is down to just two months right now–from a high of 11+ months a year ago. That means if no new homes were listed for sale everything would be gone in two months. A normal healthy market is considered to be 5 – 6 months. We are unhealthy on the anemic side right now.
Based on that, I think it’s a fairly safe assumption that if the banks released this ‘shadow inventory’ of homes we keep hearing about (and that some people are very fearful of), the current market could absorb the influx with minimal impact on median price. Again, at least in our market – I can’t speak to every market across the country but certainly in SoCal we are prepared to handle it. This would allow all the military and teachers, policemen, shop owners, young families and retired folks to get one more run at owning a home before the market heads back up. Local prices have been stable since last September/October and have actually posted small increases for the past couple months.
So if you have been trying unsuccessfully to buy a house for awhile and find your offers coming up short time and again. Don’t despair. There’s still a gripload of homes lurking just over the horizon somewhere but you’re going to have to be quick to benefit. The mainstream media is starting to print scattered articles alluding to an improvement in our housing market. By the time they let you know the recovery has started, you’ll be a day late and at couple bucks short. Housing may have led the way down, but we’ll be leading the charge back up as well. Under all is the land.

Gene Wunderlich is Government Affairs Director for the Southwest California Association of Realtors. The opinions expressed are strictly that of the author. Share your opinion with This e-mail address is being protected from spambots. You need JavaScript enabled to view it .