First-time buyers are tough to please

Buyers are fickle. Just ask their agents.

In a mini-survey released last week, 150 Coldwell Banker brokers from across the nation revealed that first-time home buyers say their focus is affordability, but their expectations are unrealistic. 

Move-in-ready conditions weigh heavily when searching for first homes, and as for fixer-upper homes? Most will pass, thank you.

These attitudes may stem from great expectations. For example, 71% of the brokers surveyed noted that first-time home buyers are looking for larger homes than their counterparts were 10 years ago.

"In the past, first-time home buyers were willing to purchase older, more basic houses in an effort to save money and break into homeownership," explained Jim Gillespie, president and chief executive officer of Coldwell Banker Real Estate. "Today, this group has greater home expectations because they have grown up more accustomed to their parents’ lifestyles."

Perhaps, or maybe it's because today's buyers can call the shots.   

-- Lauren Beale

Your thoughts? Comments?

Photo: Steve Yeater / For The Times

Comments

[OverIt]

Certainly, it's all about the expectations. While today's buyer is probably a little more informed than say someone who was in the market 2 or 3 years ago, they still mostly know what they read in papers and on the news. The media has pounded home the idea that homes are much more affordable now. In many cases that is true - which is to say what was insanely priced before is now merely ridiculously priced. But in most cases I'd guess, expectations are simply too far ahead of the curve.

As for the bargain foreclosures, often what is left is basically a husk of a home. Gutted, dirty, and possibly vandalized. There's your bargains Dreamers of the American Dream! Why a first time buyer doesn't jump on these once in a lifetime bargains is not that hard to figure out.

[Nick]

Or, as an outside chance, current first-time buyers are somewhat more well-informed, and ahead of their RE agents in understanding what constitutes affordable. Remember, the NAR is touting increased affordability now, when prices are still much higher than incomes will currently support. There are probably more than a few potential buyers who were lured into looking with promises of increased affordability from the industry, only to realize that prices are still at least a couple years away from being rational. That might explain a certain level of "unrealistic" expectations, at least in the minds of RE agents.

[RonC]

I personally think it's great that these first time homebuyers have these great expectations. If they see something they don't like they can simply move on in their search. This just puts a lot more pressure on the sellers to lower their rediculous asking prices and make homes more affordable for all of us.

[tritesprite]

Or it could be the first-time buyer demographic has changed.

Like, it used to be young couples buying for the first time but now that those have been priced out of the market it's whole families with the parents in their mid to late thirties who are first timers.

[mike]

i think if you aren't ready to let your house go for a song right now or you need to move and have no choice but to take it in the shorts, you have no business selling. a lot of first time buyers are going to get what they want right now but i would not want to be a first time home buyer right now.

[Rational Renter]

Yeah, the buyers wear the pants in this relationship.

Also, I think (hope) anyone buying today realizes they're going to have to stay in their home for at least 10 years to realize any gains on the property. Therefore, you want a house big enough and nice enough to stave off upgrade-itis for 10 years.

[Laker]

"...first-time home buyers say their focus is affordability, but their expectations are unrealistic..."

Maybe Coldwell banker will slash it unrealistic commission fees (dollar wise) and help the buyers to reduce asking prices.
Ohh, i forgot, the first interest of the agents is to get the highest price possible to maximize the commissions...

Is it unrealistic to pay 2001 price today? What is realistic? to pay 2006 prices???
The reality is that half of you agents will go out of business, trade you Lexus into a Hundai, and go work at Walmart for 8$ an hour!
The rest that will stay, will cut their commissions and trade the Lexus to Toyota and start earning their money by finding great deals for the buyers!

[Nelcisco]

"1st time home buyers tough to please". You're telling me!
but if they have a ton of $ thats one thing, but most of them don't understand financing and they still think they can make 12 buck an hr & state their income making 1200 buck an hr and want 100% financing with no reserves or any conditions, and if the loan officer doesn't deliver, no matter how many you tell them its a new day or its really back to the old days then they leave you nasty messeges on your cell how their friend found a loan that way 2 yrs ago and you're not doing "diddly sh..." as one borrower told me. OH... it was a nightmare I had to finally tell them they just had business buying as house.

[E.]

It's also possible that because it's so much cheaper to rent than to buy, particularly in nicer areas of L.A., that they may just be used to the amenities of their rental units.

A comparably equipped condo just down the street from me that's maybe 100sf bigger than my apartment is selling at a price that, if a buyer put 20% down, would put the monthly over $500 more than I'm paying right now. And that's before taking insurance, condo fees of at least $300 a month, and taxes into account.

If I tried to find a place that was even within shouting distance of my rent at the moment, it wouldn't be anywhere near as nice. That's probably contributing to the disappointment of first-time buyers more than parental lifestyles: The fact that they can afford a nice place to rent but only a middling-at-best place to buy.

[KateNonymous]

A lot of the "fixer-uppers" we've seen are tear-downs. We expect to have to do some work on any place we buy, but I'd rather not have a 10-year project for my first home. I don't want to buy something that is literally uninhabitable, and I've seen quite a bit of that.

It would also be interesting to know more about the typical first-time buyer. How else do they compare to their counterparts 10 years ago? Are they older? More likely to be parents? A lot of us have been waiting out the bubble, and I wonder how that has affected the demographics of the group--which might in turn affect what the "typical" person is looking for.

[amir]

I'm with tritesprite,

First time buyers have been denied affordable housing for several years. They're not looking for a first house, they're looking for their second - for a first house price. And in a year or two they'll get it.

[MyIrrelevantBeef]

I believe pepole need bigger houses today because people are just, er, simply bigger...horizontally, not necessarily vertically.

Call it the Super-Size Me generation.

Why, you ask. Well, it's the faith that one generation must be better than the previous. In fact, the best ever, even though there are no mathematical, scientific or logical bases whatsoever for thinking that way. Neverthelss, intelligent-looking people cling to that bad idea with the passion of the religious fanatic. So, when we bump up against natural, genetic height limits, mothers who want their children taller, instead grow them thicker.

The way I see it, for the foreseeable future, there are only two things certain - the planet getting warmer and people having bigger houses...and death...and taxes. OK, make that four things.

[fezco]

Since the 20-somethings have been locked out of the market till their mid-30's, their tastes and requirements have changed. In the olden-days, first time buyers were relatively young in their 20s and could afford to 'work' on their fixerupper. Nowadays I don't know many homeowners younger than 40. Why? Because they have been priced out of the market and their jobs have been pushed overseas.

[The original RZ]

If the buyers of 2-6 years ago thought more like today's home buyers, we may not have seen this bubble with such ridiculously overpriced homes.

[LA-renter]

I'm not looking to buy now, but I'd be a first-timer... renting is better for my family right now.

I just want to address why a first-timer will overlook a fixer-upper. I suspect most are laying out so much and taking on so much that they cannot afford to add to the expense with fixes. What kind of pricing discount goes with a fixer-upper?

Also, as other commenters have suggested, are lenders considering damage in pricing of foreclosed property?

[IToldu2CashOut]

Nick, RonC, and E. Your comments are spot on. As a potential first time home buyer with 200k plus in assets and a 90k a year job I can't find anything that is worth buying. Why would I buy a house in the ghetto with no parking spot and gang activity all over the place when I can live on the westside for $1000 a month with a room mate? I'm perfectly content to wait as long as it takes to get something equivalent to what I rent that I can truly afford. I'm not going to stretch myself and I'm not going ruin myself financially just so i can live the delusional dream of how great it is to own a home. For awhile I was looking downtown at lofts because I thought it might be more affordable and might be a chance to get in on the ground floor of something that would appreciate, but it didn't take me long to realize how far we are from reality down there. It got to the point listening to the sales brokers where I almost would start laughing at there preposterous claims and asking prices. Same goes for other area likes culver city in which I saw a house asking 600k with no parking spot and about 900 sf. Its not the first time buyers who have their expectations out of whack with reality its people like sellers and agents who can't get past the reality of a real estate bubble.

[Cal]

Unrealistic expectations relative to current inventory but the expectations are completely rational.

Basically the buyers want a certain value for their money and aren't finding it.

I brought my wife to a low-end home that was listed for 500k.

She said no.

I said, what if we could buy this tomorrow for 200k? She said she'd have the bags packed and moved in in no time.

The problem wasn't the house, it was the price. People buying now know they will be stuck in the house for a long time so they better get something good for their money. Either they get the "deal" where their housing costs are low or a retail price house that has all the amenities that they will enjoy (and pay for that privilege).

[E]

OK OK

I admit....my initial comment was a bit "agro"...hence the need for censorship.

Let me tone it down a bit.

1. First time buyers are smarter than the Realtors give them credit for.

2. Any decent house that seems to come on the market is quickly snatched up by a realtor in order to flip. This is especially true for foreclosures and houses that never seem to make it to the MLS.

Why can't the realtors work on behalf of their clients instead of their own pocketbooks? They would gain more trust and credibility if they actually helped their clients find the deals rather than scooping them up themselves.

[Ace]

First time buyers really cannot buy fixer uppers because they do not have the cash to remodel and home equity loans are not easily available.

Most first time buyers cannot even scrape together the 3 percent to do a FHA loan and very few understand what it takes to become a homeowner. People just do not have that mentality anymore. People don't ask how much something is, they ask how much it is per month and we spend 101 percent of our income.

How people buy houses will be forever changed by the years of no money down NINJA loans.

[laker is out of touch/ aka mike]

laker...

your opinions are out of touch with reality. what salesperson doesn't want to sell for the highest price possible??? why are r/e agents bad guys compared to wholesale prescription salesmen for instance. by the way you never got back to me on anyone who is performing zero down loans right now.

[mike]

rational renter..

you have the right idea. i think you should start lookiing. i have been saying for months on this blog that a house is a minimum 10 year investment. you could be o.k. buying soon if you have the means...

[Chris Pepper]

Reading some of these posts is like reading my mind. No longer looking for a starter home. I have a kid and a kid on the way. We've waiting out the bubble, but now we need a family home, not a starter anymore. We're attempting to skip a starter home and go right to the next level up.

[Common Sense]

My wife and I earn around $250K per year, are in our mid 30's and have a newborn child. In any other planet, we should be able to own a very nice house. However, in Los Angeles, the only thing we can properly afford would be a starter home at $750K, maybe that gets you a 2 bed, 1/2 bath crack house, and our combined salary puts us in the top 3% in annual wages in the US.

This just doesn't make sense and will be a big reason why Los Angeles will experience a BLOODBATH in housing prices falling for the next several years, that is unless the entire city is inhabited by multi-millionaires.

In the meantime, we'll keep renting our excellent 2000 square foot apartment, paying nothing, taking awesome vacations, going to excellent restaurants, etc. and saving, saving and saving (A LOT).

We'll enter the market when home prices fall to planet earth (2-4 years).

[E]

E with a period at the end isn't me, although I do agree with what he/she has to say.

[sfvrealestate]

Most home buyers that I meet are willing to paint or replace flooring. Aside from that, they have full time jobs and don't have time to interview/supervise contractors. Even more importantly, after completing a home purchase, they no longer have the cash they need for major fix-it projects.