A recent national survey showed that first-time homebuyers accounted for almost half of all home sales during the first three months of this year. In San Diego, first-time buyers are being enticed into the market by high levels of inventory, price reductions, incentives offered by sellers and an increase in foreclosed homes that are priced to sell quickly.
Month by month, housing has become more affordable. The median home price in San Diego County -- the price at which one-half are less expensive and one-half are more expensive -- is $385,000, a level last seen in 2003. There is ample inventory in that price range and below, including many condominiums on the market for around $200,000.
The A. Gary Anderson Center for Economic Research at Chapman University published a housing affordability study in April and said San Diego County, which was one of the first markets to experience a housing bubble, is now leading Southern California in the return to affordability. The center estimates that if the median home price in San Diego County declines an additional 5 percent, it will equal its historic affordability norm, when a family had to spend no more than one-third of its income on housing-related costs.
And in spite of tighter lending standards, there is mortgage money available for first-time buyers who have decent credit and who can make a down payment -- just like buyers had to do in the old days, before too-easy credit and subprime lending led so many borrowers into trouble. Fixed-rate mortgages remain inexpensive by historical standards, with Freddie Mac reporting that rates averaged 6.03 percent in late April compared to 6.16 percent at the same time last year.
Another incentive for first-time buyers is rising apartment rents. The USC Lusk Center's Casden Apartment Forecast for 2008 reports that occupancy rates will remain tight at 96 percent to 97 percent this year, while rents will rise an average of 2.5 percent to 3 percent. With rents on the increase, the economics of home ownership, including tax advantages, pencil out for more potential buyers.
First-time homebuyers are often understandably anxious when it comes time to make what could be the largest purchase in their life. Coldwell Banker has come up with some tips to make the process easier for everyone dreaming of homeownership:
¥ Review your credit score and take steps to correct any errors. A good score can allow you to lock in a loan with a lower interest rate.
¥ Prequalify for a mortgage to show sellers that you are serious about home ownership and well qualified for a home loan.
¥ Interview and select a sales associate you connect with. A skilled Realtor knows the market and how to negotiate for you, and can indentify suitable mortgage lenders, home inspectors and others who are crucial to the home buying process.
¥ Utilize free online tools to glean market knowledge. Web sites like www.californiamoves.com show thousands of homes in all price ranges.
Another piece of valuable advice in the current market is to move forward if you find the perfect home. Prices have declined dramatically and waiting to "buy at the bottom" can be self-defeating if someone else swoops in and buys the home you want.
Also, you may "want it all" when it comes to home size, amenities, location, etc., but your emotions may have a larger appetite than your wallet can satisfy. Factor in the down payment, closing costs, renovations, upkeep, utilities, insurance and taxes and only buy a home you can truly afford.
And finally, first-time buyers should not expect their housing investment to appreciate as quickly as in years past. Buying for lifestyle as opposed to trying to turn a quick profit puts home ownership in the right context. History continues to show that purchasing a home is a good long-term investment.
Hoffman is president of Coldwell Banker Residential Brokerage for the Greater San Diego, Inland Empire and Desert Regions.