First-Time Buyers Snatch Up Housing DealsMay 8th, 2009 | By Rebecca | Category: News
WASHINGTON // When Brett and Amy Morrison began house hunting two months ago, they thought they were entering a buyers’ market. Four unsuccessful offers later, they started to question that.
“We would jump on something the first or second day that it was on the market, put in an offer … and then find out within half a day that the place had 10 offers already,” said Brett Morrison, a 28-year-old paralegal.
Property agents in Washington, DC say young buyers seeking to become first-time homeowners with the help of government tax breaks and other incentives are getting outbid by investors and even each other. A host of factors has ignited home sales in the area, according to buyers and sellers, whose anecdotal experiences would not show up in the official statistics for several months.
“This spring, the DC market is looking more and more like a boom-time seller market,” said Sheryl Barnes of Long & Foster Real Estate. Ms Barnes, who represented the Morrisons, described last year as “phenomenally horrible for most real estate agents”.
The government and the National Associations of Realtors (NAR) both recently reported a continued decline in home sales for the month of March, with the median home price down 12.4 per cent from a year ago, according to NAR. Nobody is declaring the downturn over, but NAR noted a rise in first-time home buyers, which accounted for 53 per cent of sales for the month.
Ms Barnes noted that more first-time buyers may be one reason why lower-priced housing seems especially competitive.
Some other reasons for the recent flurry of buying and selling are specific to Washington. Forbes magazine in January declared the US capital the best place in the world for property investment, based on rankings from the Association of Foreign Investors in Real Estate. The magazine said the city is sure to benefit from the US government’s economic stimulus spending and the stability of an apparently growing number of government jobs.
Other factors seem to be spurring property activity in other areas, as well, according to Rob McGarty of Redfin, an online property brokerage firm based in Seattle but active in most of the country’s major urban areas. “The banks are finally lowering the price on all these [foreclosed] properties, and it’s causing a ton of buyers to come out,” Mr McGarty said. “We’re seeing many, many, many multiple offers.”
Mr McGarty and his Washington-based Redfin colleague, Fernando Ferrufino, said non-bank sellers were also bringing their prices down.
But buyers like the Morrisons, lured into the market in part by reports of housing deals, have been surprised by all the other buyers. “It definitely did cross our minds, [that] maybe we’re behind the curve on this and maybe it would have been possible and easier two or three months ago,” Mr Morrison said.
Like many Americans, the Morrisons believed owning their own home was part of the “American dream”, but some academics are questioning whether this even makes sense anymore.
In the first three months of this year, 67.3 per cent of American households owned their own homes, and while that is down from a high of 69.1 per cent in 2005, it is significantly up from 43.6 per cent in 1940, according to the US Census Bureau.
Much of the rise has been possible because the government has supported home ownership over the decades for a variety of reasons. Lemar Wooley, of the US Housing and Urban Development Department, said the agency has generally found home ownership promotes family stability, provides financial security, stabilises neighbourhoods and generates jobs. But today’s labour market is not the same as it was 60 years ago, when jobs were for life.
“Owning a home … ties workers down,” Paul Krugman, a Nobel laureate economist wrote last year in the New York Times. “Even in the best of times, the costs and hassle of selling one home and buying another … tend to make workers reluctant to go where the jobs are.”
Richard Florida, of the University of Toronto, says the two key pillars of the “American dream” – home ownership and economic opportunity – might now be in conflict.
“It used to be, in the old mass-production, suburban economy, that a single family home actually helped to support the economy. We had an economy where buying a house was a ticket to saving your money,” Mr Florida said. “Today the average American changes their job every three years. People can’t sell their house, so as the economy goes down, they can’t become mobile.”
And an immobile population cannot follow the jobs.
“In the United States, if we just keep trying to build a housing economy, that may be one of the reasons we fall behind,” he said.
Greg McBride of Bankrate.com, a personal finance website, said while home ownership is not for everyone, he still believes it makes sense for people who can afford it and who plan to stay put for several years.
“When home prices were going up 20 per cent a year, the prevailing mentality was that it was a can’t-miss investment,” Mr McBride said. “You now see more consideration being given to the idea that not everybody’s cut out to be a home owner, nor should everybody own a home. Home ownership is not a get-rich-quick scheme. It never was. It’s a long-term investment.”
Last week the Morrisons signed a contract on a small house in an emerging neighbourhood in downtown Washington, DC. It was the fifth home they bid on, and their offer of just under US$250,000 (Dh917,500) was accepted.
“On the one hand, I feel like we’re fortunate that we didn’t try to do this two years ago [when prices were at their peak],” Mr Morrison said. “On the other hand, maybe we should have started a couple months sooner.”
* The National