First-time Buyers Face New Hurdles | Print |  E-mail
Thursday, 03 January 2013 12:38

Banks institute additional layers to the loan process

By Carl Medford, CRS

Special to the Times

According to the New York Times (12-20-2012), “TWO recent national surveys of real estate agents suggest that first-time buyers are on the decline, their access to the housing market blocked by tight credit and eager investors.”*

Old news. In fact, you heard it first in this column back in August and September, 2012.

It’s not that there are any fewer first-time buyers. If anything, there are more. Problem is: We’re in the grip of a perfect storm… real-estate style. Here are the factors:

1. The bottom has officially come and gone — especially in the Bay Area.

2. Home prices are moving up, removing the wheel chocks for serious buyers who are careening into the market to snag a home while prices are still moderately close to the bottom.

3. A substantial portion of buyers (over 30 percent) are well-heeled cash investors snapping up properties like a huge scrapyard electro-magnet harvesting scrap steel.

4. This rush-to-buy has drained local inventory — which has NOT been replaced by potential homesellers, many of whom are holding on hoping prices will increase even more.

5. Consequently, in classic supply-and-demand fashion, any decent home that hits the market is visited by hordes of buyers, attracts multiple offers, and is off the market in mere days — typically garnering a higher selling price than its list price.

6. Lack of inventory is propelling values higher. As prices spike upwards, FHA and VA buyers are being blown out of the water by buyers with conventional loans or cash. Cash is once again King — not because it demands a lower price, but because a cash buyer can bid way over asking price and not have to worry about appraisals.

7. Banks are instituting additional layers to the loan process, adding tremendous frustration to an already overstressed market AND eliminating many potential buyers who might have qualified just a few short months ago.

8. Banks are maintaining pressure on appraisers to come in with low appraisals (every appraisal is scrutinized in underwriting and if it doesn’t meet bank requirements another appraisal is ordered.)

Mix in “fiscal cliff” uncertainties and it looks like we’re in for a rocky ride in 2013. One thing is certain — the number of first-time buyers isn’t down because there are any fewer — it’s because the market has become so littered with landmines, less and less are actually making it to the finish line.

*Quoted from The New York Times, written by Lisa Prevost, December 20, 2012

Carl Medford is a licensed Realtor with Prudential California Realty in Castro Valley and a licensed general contractor. This article is sponsored by the Central County Marketing Association at



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