Not a Friendly Place for First-Time Buyers.
May 3, 2012
Outside the Comfort Zone.
Last week we talked about how difficult the current competitive real estate market is for the move-up buyers in San Carlos. Many of these homeowners are effectively land-locked in their existing homes, simply because they can't find a home to move up to. And when they do find one, they can't put together a competitive offer because many of them have to sell their existing home first.
But move-up buyers aren't the only ones feeling the pain. There's another very significant group in the real estate machine that is probably not enjoying this market one bit : The first-time buyers.
Forget about the superheated market we're in right now for a minute. Buying a house in a normal market is still a process that pushes most buyers outside their comfort zone. It's the single biggest check that most have ever written in their lives, so it's always accompanied with an avalanche of uncertainty, nervousness, and a large dose of second guessing.
So when the heat gets cranked up under a market like we're experiencing now, first-time buyers get pushed even further out of their comfort zone.
Time and Space.
In a balanced real estate market, buyers can count on two elements that enable them to educate themselves on the home and therefore (hopefully) make rational decisions: Time and space. Buyers need time to see the home, sometimes multiple times, and to do their due diligence such as a studying a comparative price analysis, and conducting the full gamut of property inspections. Space is just the complementary effect of not having to worry necessarily about hordes of other buyers looking at the same house at the same time.
But in the crazy market that we're experiencing now, time and space evaporate. Most homes right now in San Carlos are selling within 2 weeks of when they hit the market — some much faster. Today, if you wait until an open house to see the home for the first time, you may not have the time you need to understand the house, and to get comfortable with the amount of money that you're about to part with.
Time is evaporating on the back-end of the transaction too. Instead of getting 1-2 weeks to conduct inspections, buyers are now being forced to crop the inspection time down to a matter of days. And that's if they even have inspections done at all. Things are getting so competitive that non-contingent offers are becoming commonplace again.
And forget about being the only one to write an offer on a home. Even complete tear-downs are getting multiple buyers competing for the right to tear it down.
Buying a house is somewhat analogous to learning to drive a car. You want to tackle freeway driving for the first time perhaps on Highway 280 at about 2:00 in the afternoon, and NOT by navigating the Bay Bridge during rush hour. But the latter is what the market looks like right now, and it's making first-time buyers feel rushed, frustrated, and VERY nervous.
But if you want to compete in this market, conventional wisdom may have to take a back seat. Buyers who are landing homes in today's market are thinking outside the box in their approach to buying the home.
Of course many are simply spending outside the box to get what they want.