| With home sales slowing down and condo | | | | The 1st time buyer will normally start |
| prices slipping sellers all across the | | | | with a one or small two bedroom house or |
| country seem unable to get their asking | | | | condo with the hope that price rises |
| price. | | | | will allow then to "Move Up" to a bigger |
| Christopher Mayer, a Columbia University | | | | 3 bedroom home in a better area within a |
| economics professor said recently "If | | | | short period of time, say one to two |
| you're expecting a short-term gain, you | | | | years. Slower price rises or higher |
| should be looking elsewhere," he had | | | | interest rates will put the loan |
| argued for many years that land | | | | repayments on a new larger home out of |
| shortages and rising populations would | | | | the reach of the buyer and this leads to |
| translate into ever-rising prices in the | | | | the whole market getting weaker. |
| "superstar" cities like New York and San | | | | The Europeans have an interesting system |
| Francisco and LA. | | | | in place, credit scores have no bearing |
| With many of the real estate bulls now | | | | on the way they calculate your ability |
| waving the caution flag we have clearly | | | | to repay the loan. Under the banking and |
| reached the time for a re-think on this | | | | home loan laws you most provide proof of |
| subject. Before we start going down the | | | | income, once this is done they will |
| "Doom and Gloom" road it should be | | | | offer you the chance to finance up to 4 |
| understood that owning your own home is | | | | times your income. Most programs will |
| still the corner stone of the "American | | | | finance up to 90% of the loan to value |
| Dream" and it will always be that way. | | | | of the property this system seems to |
| What does it take to fuel that dream, | | | | ensure a steady supply of 1st time |
| home prices are normally driven by 3 | | | | buyers along with regular increases in |
| things. The first is low interest rates, | | | | house prices with affordable loans. |
| the second is the willingness of home | | | | LA and New York are the so called "Super |
| buyers to pay for their idea of the | | | | Star" markets and not really reflective |
| American Dream and lastly the ability to | | | | of the whole county, so your strategy |
| attract 1st time buyers to the market. | | | | will largely depend on where you live. |
| Let us take a look at Los Angeles as a | | | | Local markets are affected by many |
| market place for home buyers, the | | | | forces like jobs, the new house market |
| average home sells for 10 times the | | | | and inflation to name but a few. |
| average salary. Whatever way you look at | | | | Homeowners who hold on to their homes |
| it this is unsustainable, no matter how | | | | for a number of years and pay down their |
| creative the banks and lenders become | | | | debt do far better than those who |
| with their new programs. As it becomes | | | | refinance every two years taking out the |
| more difficult for the 1st time buyer to | | | | equity they have built up, this really |
| enter the market it starts to affect | | | | is the Number One Cardinal Sin for |
| "Move Up" market. | | | | homeowners. |