Young homebuyers make the best of a bad market
Low housing prices and a glut of properties for sale mean that young homebuyers can benefit from the bad economy.
When Jason Hentrich and Allison Duffield, who will be married next month, sought to buy a home in Levittown, Pennsylvania, they had a few ideas about what they wanted.
Jason, who works as a service manager at an auto-supply shop, was hoping to find a garage big enough to allow him to work on the cars he races on the weekend.
Allison, who works for a green energy company, was particularly taken by one home's modern kitchen, with stainless appliances and a sleek red backsplash.
Throughout the 2012 presidential campaign season, the BBC will return to Levittown, Pennsylvania to explore issues facing America's middle class
Both wanted to find a house with a yard, since they hope to soon get a dog - though Allison prefers a petite Brussels Griffon and Jason favours German Shepherds.
But most importantly, they're looking for a place that they can make their own, and that will grow as their family grows and their future unfolds.
"We want a blank canvas," says Jason, 28. "Once we move in, we can do what we want with it. We can make it our home and start our family,"
Though the American economy is currently in a slow recovery, the housing market is still suffering. Though 2011 saw a drop in the foreclosure rate, that is only because legal measures often delayed the inevitable. Foreclosures are expected to rise again this year.
At the same time, home values keep falling, and do not look to recover anytime soon. "We're headed toward the bottom, but that doesn't mean we're going to hit the bottom and bounce back up; we're going to hit the bottom and remain there for a while," says Katie Curnutte, a real estate expert for Zillow.com.
A market full of foreclosures makes it hard for people looking to sell a house to compete, including those who have homes with negative equity. That puts those looking to sell their house so they can downsize to a cheaper option or move for a better job at a disadvantage.
But among all this bad news is a ray of optimism. "Affordability is really high right now," says Ms Curnutte. "Because first-time buyers don't have to worry about selling another property, they're able to take advantage of the market."Cash crunch
Not all young couples are able to take advantage of lower housing prices. Currently, only one-third of homebuyers are first-time buyers, down from an average about 40-45%.
"Rates are low, which is a mystery," says Laurence Yun, chief economist for the National Association of Realtors.
Buying a dream house in a down economy
Blogger Katie Bower chronicled how financing programs and frugal living helped her family secure a dream house in foreclosure:
- Creative planning: It's tough to sell in this economy, so the Bowers decided to rent their home, which was located in a good school district, rather than wait for a sale. The current renters are planning to buy the home next year.
- Government assistance: Like many young couples, the Bowers qualified for a Federal Housing Administration loan (FHA) which required less cash up front.
- Frugal living "[N]o more cable, or eating out, or my cell phone…We even are considering becoming a one-car-family until we figure out how expensive our living costs will be."
Source: Katie Bower and BowerPowerBlog.com
"With such great affordability conditions, you'd think first-time buyers would come into the market."
Instead, he says, the numbers indicate that they're having trouble securing the necessary financing as home lenders continue to be cautious.
But Ms Curnett says first-time buyers are beginning to rise, and other trend watchers have also noticed a recent change.
"Just in the past six months, people have begun to say that banks are easier to work with," says Maxwell Gillingham-Ryan, co-founder and CEO of ApartmentTherapy.com. He says he has seen a marked increase, both online and off, of young people making home purchases.
The combination of affordability along with the more frugal tastes of the recession generation makes home ownership more accessible, he says.
"They're not being extravagant, but they're taking great pride in fixing up the homes they do have and sharing that information."
For Robin Kemmerer, a Levittown real estate agent, things began to shift at the beginning of this year.
"This January I really was thinking, 'Yes, it's changing'," says Ms Kemmerer. "[There are now] lots of young buyers, lots of young people getting married. All of them are coming out, and they want to buy houses," she said.$50,000 bet
When Ms Kemmerer's parents moved to Levittown in the 1950s, they were part of a generation of families looking to buy into the middle class. William Levitt's planned communities provided affordable housing with room to grow. The homes were a ticket to the American dream and the promise of raising a family and setting down roots.
Ms Kemmerer says that in the past decade, however, young buyers were more focused on making big profits and luxury living than building a home.
"They were only looking at it as an investment, which it is, but people thought, 'I'm going buy this house and I'm going to make a quick $50,000.' And unfortunately everyone got caught up in all that," she says.
She and her staff watched in wonder as the terms for home ownership dropped, prices soared, and people were approved for mortgages they couldn't afford. The ensuing crash was tough for homeowners of all ages
But recently, the attitudes have changed.
"Now people are realistic. Young people say, 'I'm into it just like my parents were when they were out looking,' " she says.
"They're buying a home for their family, so they're looking for the long term now."