Why You Love First-Time HomeBuyers
NEW YORK (TheStreet) -- Amid all the attention on rising home prices, let's not forget that millions of homes are still worth far less then they were at the 2006 peak.
A March 5 report by CoreLogic (CLGX) , which tracks the housing market, says home prices gained 9.7% in the 12 months ended in January. But then there was this: "Including distressed transactions, the peak-to-current change in the national
The biggest peak-to-current price declines were Nevada's -51.6%, Florida's -43%, Arizona's -38.9%, Michigan's -37.4% and Rhode Island's -35.5%.
So, what's the long-term lesson here? There are many, but here's one that gets overlooked: You may be better off if the home you own or want to buy will appeal to first-time buyers.
There's a simple reason: The first-time buyer doesn't have to sell a home to buy another. Unlike homeowners who want to trade up, first-time buyers don't have to worry that the housing market is slow or that prices are lower than they once were.
For the first-timer, the key issues are the ability to get a mortgage and to find an affordable home that will grow in value quickly enough to be sold without a loss in three or four years, if necessary. Since the typical first-time buyer is young, a modestly priced home will probably be more appealing than an expensive one.
This doesn't mean conditions are great for today's would-be first-time buyers. Many are having trouble getting a mortgage because lenders have become very conservative. And several analyses have found that first-time buyers are having trouble competing for homes with investors.
Of course, from a seller's perspective, it doesn't matter whether the buyer is a first-timer or an investor. Investors are scarfing up inexpensive homes because they appeal to renters, who are the future's first-time buyers. Any kind of demand is good from the seller's point of view.
All this suggests that a modestly priced home is a safer investment than an expensive one, because there will be a better chance of finding a buyer if times get tough.
Aside from modest price, what makes a home appealing to a first-time buyer?