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    Is the First Time Becoming Impossible?

    I always say that Real Estate is “local,” and even our own Bay Area tends to be significantly broken into individual mini-markets that don’t always correspond with each other. But every now and then, an article appears in one of the national publications that has meaning everywhere.

    One of those significant articles was recently published in the Wall Street Journal, and it quoted some very interesting statistics about first-time homebuyers. The over-arching theme was that those who are trying to make their first home purchase are having a more difficult time than ever. While the portion of the market that has represented this demographic in the past has hovered around 40% since 1981, the current slice for 2014 is down to 33%, according to the National Association of REALTORs®(NAR).

    There are several reasons for this shrinking piece of the puzzle, and although they are discouraging, they aren’t surprising. The typical first-time buyer is 31 years old, which is part of the issue. Most 31-year-olds haven’t had an opportunity to save the amount needed for a down payment. Many are saddled with crushing student loan debt, and the parameters for obtaining affordable mortgages have become more and more narrow.

    It is no shock then that the rental market has become increasingly tight and every bit as competitive as the sales market, and we could write several articles on that subject alone. Another interesting stat shows that the year with the highest share of first-timers was 2010. What was significant about that year? Well, two things, at least: prices were significantly lower then, and that was the year that the federal government ended its tax credit for first-timers. Big changes.

    MarkBesides the logistical issues, the article also cites the psychological factors that might be behind the shrinking first-time portion of the market. Those who have recently launched new careers, or otherwise are new hires in the recovering job market, may be reluctant to commit to a long-term obligation of a home purchase, having seen the entire economy implode, which was largely related to home purchases. It might just be true that the “dream” of a home purchase in the millennial generation has slipped from laudable and achievable to downright impossible, leading many to simply cross it off their list of long-term goals.

    This doesn’t just affect millennials. It’s systemic, really, as the first-time share of the market eventually transitions into the move-up market, and ultimately into the empty-nest downsizers. Building and maintaining a market that first-time buyers can securely enter is something that will need examination and stimulus, if the home-buying and selling market, one of the most significant pieces of our complicated economy, is to survive in the world as we know it.

    In closing, a news tidbit: This month, the new Residential Purchase Agreement (RPA), also known as the “contract” or the form that is used for writing most offers on California residential real estate, is being released. If you’re thinking of writing an offer, or reviewing offers on your own property, be sure you ask your agent if this new contract affects you.  It will have many significant changes to its language and provisions.

    A Bay Area native, Mark Penn has been a REALTOR® with Coldwell Banker since 2004. He is also active in animal welfare, and is a former educator, facilitator, and air traffic controller. Mark can be reached at mark@MyHomeInSonoma.com