Today's buyers: 'The most nervous people I've ever met'

Interesting story from Reuters today laying out the anxieties of first-time homebuyers in the current market.

"They're the most nervous people I've ever met in my life," said Bob Moulton, president of Americana Mortgage Group, referring to the potential first-time buyers he speaks with.  "They've seen what can go wrong in the mortgage market. Everybody's advising them, from the mother, to the father, to the uncle, their co-workers, telling them, 'Don't buy. Prices are coming down.' "

The story is worth reading for those of you who believe demographic trends predict real estate supply and demand: ... And population projections by the National Association of Realtors suggest hundreds of thousands of young Americans are sitting out the housing market entirely -- neither buying nor renting.

What happened to the projected demand from 700,000 to 800,000 people? NAR's Walter Molony: "Some of them are moving back with their parents, never left the house, they're doubling up with roommates."

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Getty Images

Comments

[Cal]

I'm sure the sellers aren't exactly whistling Dixie either.

But a buyer today IN LA is really letting emotion override logic or allowing a "real estate professional" convince them into a home. They should be nervous, they are making a mistake.

I also like how the NAR thinks the demographics are favorable for the market, Obviously they ignored the SCIENTIFIC study showing the exact opposite. Since the NAR doesn't ever release a report or methodology they can say whatever they want.

[JW]

"Everybody's advising them, from the mother, to the father, to the uncle, their co-workers, telling them, 'Don't buy. Prices are coming down.'"

And that just might be the best advice they may ever receive in their entire lives. Anyone who buys a home in any of the bubble markets right now is an idiot (unless you're filthy, stinking rich and you really don't care about losing a lot of money).

[fezco]

I am one of these skittish masses. It has been a while since I have posted on this blog and I promised my wife I would refrain from reading it this week. She claims (and I agree), that reading this blog keeps me focused on these issues and makes me depressed. The fact remains that whichever way you slice it, at least in the southland, competition for housing will dictate the pricing. I understand that fraud and greed have been partially responsible for the 'bubble.' The fact remains that so-cal RE is hot because of the overwhelming pressure of population. As long as immigration goes unchecked, and folks have more than 2 kids, there will be a huge demand for housing. As a native angeleno, I have seen this town transformed into something akin to other high density third worlds cities such as San Paulo, Mexico City etc...
The notion that one family = one house is as old as one family = one income. The norm is now to have an occupant in every room except the bathroom and kitchen. As long as this is acceptable, housing will continue to be sky high. Our politicians and developer-robber-barons are capitalizing on this trend. Please read the following over a nice plate of soylent green:

http://tinyurl.com/yvxl2g

[vultur]

Here here Fezco! Let's ban all them foreigners from our shores! Don't let 'em in! And while we're at it who let them women into the workforce? And them blacks! Ya, there are too many of them too! And the gays- where did they come from? That just ain't right, I say I say!

We need to return this country back to its rightful owners- the white folk! Yessir!

____________
Oh sorry, you didn't say that did you. You just implied it with your xenophobic diatribe.

There's no place for you in a tolerant society.

[toby]

WHY oh WHY did Economists believe that a potential home buyer would instead of buying, decide to lock themselves into a high valued lease?

It makes absolutely NO SENSE.

"Hey, I'm a possible homeowner, but the market is bad right now, so instead of homeownership, I will rent a one bedroom for a ZILLION dollars a month so I can....save money?"

Unless you're in your 20's, people don't usually rent an apartment for only a year.

Moving as an adult is a nightmare. You don't just have clothes, a CD rack and a futon.

And if you have the resources to buy a home (in a normal market were money down counts), then you own other things like...a couch, a refrigerator...a bed set.

And it cost MONEY to move as an adult, thousands of dollars. With deposit, first month rent, movers and such, it cost me 5,000 dollars to move from my house to an apartment in 2005.

And people right now are thinking "That money is better spent on a down payment."

To spend thousands of dollars to move to a renter for maybe a year or two MAKES NO SESNE to the common buyer.

Again, WHY oh WHY does it make sense to all those supposedly smart Economists.

[jgw]

Yes, some young people would rather make some personal sacrifices (moving in with mom & dad, getting a roommate, etc.) than spend $3,000 a month-- plus taxes, plus insurance, plus HOA dues, plus the responsibility of putting up cash when something inevitably goes wrong-- for a condominium that rents for more than thousand bucks less. I, for one, am shocked that this kind of utterly responsible, sensible, common sense decision strikes so many people as strange!

[David]

Mr. Moulton should venture out and talk to some people that already bought in LA over the last few years. They're not only the most nervous people you'll ever meet, they're the most depressed. I simply refer to them as "the greater fools".

[fezco]

vultur,
Do you deny that population pressure effects housing prices? I take offense that you think that I am a bigot. As far as immigration, I was referring to legal, illegal, and from other states. You can't deny that the constant influx of bodies into the southland hasn't transformed it.

[Frank]

When will people be more comfortable about buying? When the market is up? When everyone is buying so that competition is stiff and it's a seller's market again? Yes, prices are down. However, even with the losses in the last 12-24 months, prices are still up in Los Angeles in the 60%-80% range since 2000. The only people in real trouble are those that couldn't afford a 15-30 year fixed loan so they got the 1 year ARM to satisfy their "Satisfaction Now" mentality. If you can afford a 15-30 year fixed loan, which is in the high 5% range right now, you will win. Does anyone see Los Angeles Real Estate (especially on the WestSide) being down forever? Study the past to benefit your future.

[vultur]

Maybe you didn't mean any offense Fez, and maybe I am hyper-sensitive because I am a humanitarian.

However, I consider the emancipation of people from poorer regions to wealthier regions as a benefit for humanity and to the extent that it puts some pressure on the infrastructure of the land I believe that as the wealthiest nature on earth we can accommodate them.

They're just trying to make a better life for themselves, remember that. You're not the one crammed into a 1 bedroom apartment with 3 other families.

[LA Land Fan]

fezco, can you prove that the influx of people have spiked up so steeply to justify the ballon in housing prices in recent years? in my opinion, there have always been a high influx of people, chasing the sun, fame and fortune in LA. but housing managed to stay within reach to the middle class, sure there were a few spikes along the way. only since the influx of easy credit to everyone and their mom in recent years, precipitated by a dive of the tech markets from the internet bubble, did real estate become crazy hot again. but what stays up must come down. just another cycle, but people are sure clining to hopes that their house really did appreciate 400% in 4 years and there is no bubble...

[ash]

Please lets not vilify fezco as he/she brings up an important point, I am sick and tired of these knee jerk reactions that label people for views, that people like vultur might themselves hold one day (everyone starts out as liberal in college and progressively becomes conservative as the realities of life and family dawn upon them).

I am a non-white legal immigrant myself (from Asia) - waited in line for 8 years before I got naturalized. And yes, I am proud to say that I do NOT want this adopted home of mine to become like the country I left. I did not suffer all the hardships of migration so that I could move to a place resembling Mexico with all its associated pollution/nepotism/crime, NO - I want to live in the USA where, it does not matter which color/ethnic background you are from, as long as you respect the law and civic sense. Is it really too much to ask?

People easily forget that what has made this country great is the rule of law (that illegal immigration by definition does not respect). Before you start criticizing people like fezco, take a week or two off from work and go visit China, Mexico, India or Kenya. Then come back and tell me whether you still want this country to become like one of those places!

[Uncle Billy]

No need to be skittish. Warren Buffett was on cnbc this morning for 3 hours reassuring us of a number of things:

1) Our standard of living is 7 times higher than ___ years ago

2) Though we're in recession and things will get worse, we're going to be just fine.

3) The dollar will continue to lose value

4) He reminded us that Woody Allen once said: "... the world is facing a fork in the road more important than any other time in history. One path, he explained, leads to alienation and despair. The other path leads to total destruction. “I pray,” he said, “that we have the wisdom to make the right choice.”

5) See's Candy and Coke are solid investments.

[Rob]

"You just implied it with your xenophobic diatribe."

Vultur, Are you serious? How did you get a racist out of that? Please explain your foolishness.

[rogue element]

How about all the commenters just comment on the article and its content instead of what other commenters say. Oh wait, I'm doing just that. Darn it!

Okay, but it seems that people would rather spar with one another than take issue with the content of the article, which is unfortunate.

It makes sense that buyers are nervous, we are in a down market and no-one in their right mind wants to make a bad investment, especially when it's an investment in a roof over your head.

Also, why would anyone ever trust a housing estimate from the group that's trying to sell houses. That's like getting advice on what college to go to from a USC Trojan. And trust me, that's bad advice.

[Truth2Pwr]

I for one think that we all should welcome Fez and Frank to the year 2008. Congrats lads, that must have been a hell of a nap because you OBVIOUSLY SLEPT THROUGH EVERYTHING THAT'S HAPPENED FOR THE LAST 7 YEARS!!! My best friend can offer the most impassioned speeches about why he's a genius for buying a property in Bixby Knolls this week because despite the fact that the buyer bought it for $800K in 2005 and was happy to unload it for $600K two years later, he's convinced himself that as of tomorrow the market is going to magically slam on the brakes and make a U-Turn back up towards 2008 values again. I have been filling his inbox with facts every morning for weeks and it didn't matter. Delusional people who despite the data have convinced themselves that illegal aliens are going to pick up the slack in the SoCal market or that Bixby Knolls is so abfab that people will always clamor to live there are beyond hope.

Go ahead F-boys, put your money where your mouths are. I'm sure that after 15 years of ramen noodles and government cheese you'll be back to break even with todays prices and then the rest of us sure will look foolish!

[sunsetbeachguy]

A bunch of fuzzy minded tripe...

CFE calculators f'ing exist
MCFE mortgage calculators f'ing exist

Use them, they will answer most of your questions.

28-33% DTI for a mortgage is what is sustainable, anything more and you are just kicking the foreclosure can down the road.

[fezco]

OK...
My pessimism got the better of me and I apologize. Indeed I read the blog occasionally and what Truth2Pwr and others make a lot of sense. I acknowledge that there has been a false climate of inflated housing prices. What I am saying is that there are many factors that have contributed to this problem. Population pressure is one of them. Sorry rogue_element for bringing it up in this particular thread.

[Sean K]

ASH- "(everyone starts out as liberal in college and progressively becomes conservative as the realities of life and family dawn upon them)."

1. I thinks thats a load of crap... point me to a dependable survey or statistic that backs that up.
2. If people are more 'liberal' in college, that's because its the only time in their self-centered life they're exposed to intellectual challenges outside of finding a way to make money.
3. The realities of life and family have nothing to do with conservatism. Thats a propaghanda stunt that you bought into. By having Nancy whine "just say no" and hating on homosexuals and pandering to the nutball religious right, they've conviced people they are more "pro-family". I guess YOUR family doesn't need public education, a country not trillions in debt and being attacked by radicals who hate us from all sides, and a lead free environment without brown air. Honestly, I don't give a dam about 'families' per se. Because if I do what benefits PEOPLE that will happen automatically... last time I checked, families were made of PEOPLE. This family tugging propaganda might seem all sunshine and smiles on the face of it, but it stinks of the same old typical, selfish, nationalistic right wing B.S. they always use in disguise.

[Sean K]

And btw... I don't see anything either conservative or liberal about what Fez said. I don't find it the least bit offensive or xenophobic or see it as a 'diatribe'. He was making perfectly objective and observable statements about the effects of population on housing prices. He even mentioned people having "more than 2 kids" (to which i would ask, 'why do you feel you need or are entitled to TWO kids?') and immigration to california from within the U.S., from other states. I honestly can't tell what their political persuasion is, nor do I care in the context of this REAL ESTATE discussion. Vultur is just being shrill and making liberals look bad.

[IToldu2CashOut]

for the people who think it is better to buy then rent when not put your data into this tool and read the article:

http://www.nytimes.com/2007/04/10/
business/2007_BUYRENT_GRAPHIC.html

yes it is expensive to move into a new apartment. could be as high as 5k, but that is nothing when you compare the cost of putting 125k down for a 500k condo and then having it depreciate or even stay flat. What is worse to spend 5k or lose 200k? Renting in LA is a steal!!!

[JL]

Contrary to the homepage-featured quote: why wouldn't now be the best time to buy? The bubble has burst. Prices are down and foreclosures are up. Why not get in on the ground floor of a failing market that will inevitably start to rise again in the years to come? Why must so many prognoses of the market be either doom and gloom or irrationally exuberant?

[Nico]

I would like to know which of the previous writers
are single vs married, and which have children
and which don't. Also, how many are male vs female?
Just as a data point re: attitudes towards
long term investments vs fear to commit to RE for
a variety of reasons

[SJ]

Today's buyer is not only nervous, but STUPID.

In this economy and with this giant bubble, prices will continue to drop for another year AT LEAST.

Why would you not be nervous about buying a house now when in a year it will cost you tens of thousands of dollars LESS!

[silverlaker]

The decision is easy and there's no need for buyers to be nervous, IF you can honestly answer "yes" to the following questions, then you should go ahead and buy.
1) Is your job secure? (We are in a recession after all as Warren Buffett has just informed us)
2) Can you put 20% down?
3) Will your mortgage be no greater than 3 times your yearly gross income?
4) Will you stay in your new home for at least 5 years?
5) Do you understand your house is just a place to live and NOT a way to make money, but more a way to preserve money? (REPEAT: You will most likely NOT make money on your house until the next bubble)

[Kathryn]

I don't think it's just the price of real estate that's holding younger first time buyers back. I'm 30, I work with mainly 30 somethings who were all obsessed with buying homes during the bubble. Most of them just talked, a few jumped in, and were swamped with debt.

Now, I think younger people are starting to realize there are more expenses to owning a home than just making the mortgage payment. Owning a home is really expensive, and it's not really worth sacrificing other things like a nice car or vacations just for a place to live house. Nor are they willing to buy a starter home or in a so-so neighborhood. So they wait.

Plus owning a home locks you in to one location, and that really can be hard in this job market. If you're looking at younger buyers, they're not the types who are going to be working for one company for life. With all the talk of layoffs, it's not looking like a good time for first time buyers.

[NoWayinLA]

Frank: "When will people be more comfortable about buying?"

Simple... when the price is such that a first-time buyer can afford the kind of house, in the kind of neighborhood, that they're willing to accept.

Prices may be up since 2000, but that only helps people who bought in 2000. For people who buy right now, they may not see any equity for the next ten years. And considering that the average family now lives in their home for about six years... that's a problem.

[buz]

I can't fathom why anyone would buy now. Beyond idiotic. Unless some seller or bank accepts a really low-low ball offer. The snowball that is the housing downturn is just about to pick up speed and head downhill. The last peg holding it in check is the relatively low employment we currently now have. Just wait until that gives way, and it will. Check for the unemployment number coming out this Friday.

[Paul H]

But a buyer today IN LA is really letting emotion override logic or allowing a "real estate professional" convince them into a home. They should be nervous, they are making a mistake.

Cal, I'm a regular reader of this blog and I find your comments very straight forward and logical. Perhaps you're in the business?? Can you go into more detail why you think buyers are making a mistake to purchase in this market, other than the obvious "prices are falling" response? It's safe to assume that if a "smart" buyer purchases in this market, with the intent to live in the property for some time, that it's not that bad of a decision. Even if faced with a loss in the short term. Thanks. P

[tealeaf]

A bunch of fuzzy minded tripe...

CFE calculators f'ing exist
MCFE mortgage calculators f'ing exist

Use them, they will answer most of your questions.

28-33% DTI for a mortgage is what is sustainable, anything more and you are just kicking the foreclosure can down the road.

Posted by: sunsetbeachguy | March 03, 2008 at 04:26 PM

Possibly, the most beautiful f'ing poignant post in a long time. So succint. Said another way, it's the affordability, stupid!

[Joseph...The Real Estate Guy]

Buyers have always been apprehensive when purchasing a home. It's only normal.

P.I.T.I. is getting very close to RENTAL RATES.

[Uncle Billy]

I called today, half-heartedly on a small development in North Los Angeles -- about 30-40 4+ bedroom homes in the 3,500-6,000 sq. ft. range. Row after row of square, blank, tract homes. These are worse than mcmansions... just boxes with some trim. It looks like the whole bunch are sitting empty. I asked the price. Answer: Starting at $1,000,000. "But due to the soft economy, we strongly encourage you to submit an offer."

Will the bank be selling these for $200k each in a year? That's the question that makes em nervous.

[Laker]

Uncle BIlly,
the bank/builder will be selling these for $200-300k each in a year-year and a half. that is my thought.
There is no reason to be nervous about it, unless somebody is forcing you to buy today and pay top $.
I say, buy TODAY if you can have a low ball offer accepted. Low ball offer is 2000-2001 price level.

[JW]

Truth2Pwr hit the nail square on the head. A rose is a rose and by any other name.................is still a rose. I have a very good, long-term friend who has been a loan officer in the mortgage business for the last 10 years. I told him several years ago that this was likely to happen and when it finally started unraveling, I emailed him every piece of evidence that I could get my hands on to convince him that he needed to change careers or starve. He didn't listen and after almost of year of closing almost zero loans because he couldn't get an appraisal for the sale price or find an underwriter for the loan, he finally threw in the towel last week. Now, he's struggling to find a new career in a down economy. Reality is what it is and all the lipstick in the world isn't going to make this pig called real estate any more attractive for a verrrrrrry loooooooong time. That, my friends...................IS REALITY.

[John T Watts]

All these people jammed into the same house or apartment must be wonderful news for people in the toilet unstopping business.