Entry-level buyers compete for that first home
| Saturday, Oct 17 2009 11:39 AM
Last Updated Saturday, Oct 17 2009 11:39 AM
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Henry A. Barrios / The Californian First time homebuyer Lindsay Jones has become frustrated with the housing market after 2 attempts to buy a home fell through. She is quick to point out the features a house that she has an offer on located on El Tejon Avenue in Oildale. She is hoping this will be the one.
Lindsay Jones is hoping the third time's the charm.
The aspiring first-time homebuyer has fallen out of escrow twice, and is waiting to find out if her offer on a third property will result in the actual purchase of a residence.
"I was really torn up about it when I didn't get the other two," said Jones, 28. "I really hope this one comes through.
"It's pretty chaotic out there."
Like a lot of aspiring homeowners, Jones is finding that the same forces that have made this an attractive time to buy an entry-level home are making it nearly impossible to get one.
Prices and interest rates are at their lowest levels in years, and state and federal tax credits have been extremely successful at spurring what had been a sluggish real estate market.
That's resulted in a big boost to demand at a time when supply is limited.
The supply side of the equation is counterintuitive. With 8,560 foreclosures last year and another 5,860 so far this year as of last month, there ought to be a glut of property on the market. But banks have been slow to release their inventory, and anyway, the best deals were long ago plucked up by investors who could pay cash during a credit crunch.
As a result, the Bakersfield area has unsold inventory of just two months, according to the latest Crabtree Report, a closely watched monitor of the local market of existing homes.
That's left pickings slim and quality dubious for shoppers looking to own and occupy their first home.
Jones' experience is typical.
She started looking seriously in the spring, wooed by tax incentives and her conviction that home prices were at or near the bottom.
Jones hoped to take advantage of an $8,000 federal tax credit for first time homebuyers that will end in November.
"That was a huge factor," she said. "It figured into my purchase price, because it was part of my budget for making repairs."
Repairs, Jones said, were a given. All of the houses in her price range had major problems.
"You walk into even the ones in nice areas and they're seriously gutted," Jones said. "People got really upset and kicked holes in walls or left all their trash everywhere or took off with major appliances.
"Right off the bat, to make it live-in quality, you have to spend thousands of dollars."
There's also a state tax credit, but its future is unclear.
The credit is for $10,000 or 5 percent of the purchase price of a newly built home, whichever is less. The law held that the sale must close between March 1, 2009 and March 1, 2010 or when funding ran out.
The $100 million cap was thought to have been reached in July, but it turns out $30 million of that allocation is unclaimed, so the state Senate Thursday voted to extend the program. The Assembly will be taking up the matter this week.
Jones tried to buy an older home in Rosedale listed for $105,000 in May. A bidding war bumped the price up to $119,000, which the former Army reservist was prepared to pay with a Veteran's Administration loan, but when the house appraised at $100,000, her financing fell through.
When she went looking again, sellers didn't want to deal with the V.A. so she had to switch to a Federal Housing Administration loan.
That done, she tried again in August, on an Oildale condo listed for $110,000. Her offer was accepted, but the condo later appraised for $90,000, and Jones decided she didn't have time to wait around for the sellers to negotiate a short sale.
A short sale is an agreement with a bank to sell a home for less than the balance of the mortgage.
Jones had a $90,000 offer for a house in Oildale accepted two weeks ago, but it, too, has appraised lower.
"Now we're just waiting for them to see if they're going to go into a short sale," Jones said wearily.
Her real estate agent, Cindy Veiner, has tried to be encouraging, but says there's just no getting around the fact that buying a first home in this market is not for the faint of heart.
"You have to be prepared to roll up your sleeve and bid aggressively on diamonds in the rough," Veiner said. "And you've got to move fast.
"I feel like an on call brain surgeon. I have to be ready at a moment's notice, and I'm in constant communication with my clients."
Banks just don't have the staffing capacity to move a motherload of inventory through the foreclosure process quickly, particularly when properties mostly are owned by investors with competing liens, said Richard Green, director of the University of California's Lusk Center for Real Estate.
Meanwhile, "Appraisers are scared to death of getting sued if a home turns out to be worth less than they said, so they're being extremely conservative," Green said.
That's made buying an existing, entry-level home a difficult proposition.
"If it's any consolation, you're not alone," Green said of the local market. "The same thing is happening in Las Vegas."
There, many first-time homebuyers have turned to new construction to avoid the frustration of the existing home market, Green said.
It's happening here, too, said Bob Decker, executive director of the Home Builders Association of Kern County.
"Especially in the comparable price range, around $140,000, builders are competing pretty well with the foreclosures," he said.
Jones hasn't thought through what her next move will be if her latest deal falls through. She feels a little numb, she said, so she hasn't got her hopes up or made concrete plans.
"I've kind of lost all feelings towards the house process," Jones said. "I don't know if it's a lack of hope, it's just I can't invest anymore feelings behind it. I'm not excited."
