Before the party, who is buying?
Yesterday, I wrote about my middle-aged friends and our party chatter.
I came to that party on a Sunday night directly from a meeting where I wrote up an Offer. I had been to 12 properties that weekend with would-be buyers. The contrast is startling. There is still demand for housing when there is so much financial uncertainty.
I give a pretty bleak picture of the market, in terms of appreciation. This weeds out buyers who are still in la-la land about expecting the market to turn upwards the second they buy. I also make them look at the rent-versus-mortgage price, monthly. The downturn in prices and more-so the low interest rates are keeping the buying alternative alive for those in the high-rent districts. Sunday night’s buyer is the perfect example. When I asked why they don’t rent, he said, “I looked at rental houses and they abut parking lots or look like hell inside.” So they are committed to buy.
I also see a change in the financial planning of 2010’s buyers. Mostly, they are single professionals and young families who qualify to buy on one salary. They are planning on living on a single income. Present or future partner’s income will go to reserves or for extras.
Maybe more people have read, The Two Income Trap than I thought! I think what’s more likely is that the economy is making people see that Ms Warren was right about American’s tendency to spend all we earn. With family incomes getting slashed by unemployment and under-employment all around them, buyers are not betting on two full incomes for the rest of their working life.
Another reality check on the two-income lifestyle is divorce. My clients who are divorced, or have owned with another person before, are more skittish about buying dependent on two incomes. This is changing who is on the mortgage and who is on the Deed for both married and unmarried couples.
My observation for 2010, as it draws to a close, is that I am seeing an increase in single-income qualified buyers in my service. I am wondering if it is a trend. And why it is happening. What do you think?
Also, a shameless plug:
Back in March, I held a book discussion on The Two-Income Trap by Elizabeth Warren and Amelia Warren Tyagi. I think the concepts in this book are important and you should have read it years ago! I covered another book Naked Economics by Charles Wheelan in July.
We will be doing it again in mid-January with The Big Short. I hope you pick up the book and join the conversation.
