Tuesday, February 3, 2009

The Housing Market - What it means to first time buyers

The housing market has been on a cooling decline and there is now even a renovation subsidy for contracts signed between Jan 2009 and Jan 2010 to try to reduce the slowdown of businesses servicing this sector.

However, you have to look carefully at which sectors of the housing markets are dropping, when, where and WHY. Geography is important. Location, location location. However, the types of houses and the old fashioned supply and demand across different residence classes will greatly affect prices.

This puts first time buyers into a bit of a conundrum. Yes the market is slowing so if they can hold off, they can expect to have loans at lower rates (if they qualify... Banks are not interested in people with less than stellar credit profiles) and housing prices are dropping. However, it's not that simple.

Consider this: A 65+ year old baby boomer retiree who no longer needs a large house and wants to start liquidating the equity will sell their large house into a price depressed (buyers) market. However, with the sell option, they will probably buy (or rent) a smaller apartment or dwelling.

However, a 27 year old couple looking to purchase their first dwelling isn't looking to buy the same house that the retiree is selling. In fact, if anything, they are looking into something in a similar class in terms of bedrooms and square footage and will end up competing in the same demand curve.

Generally speaking, for a Yuppie looking to buy a house, the window of opportunity seems to be reaching it's prime shortly and will slowly start to close within two years time. Things might be different for a couple looking to start a family and might want to upgrade or buy into a larger house.

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