I read an interesting article today that states are running out of homebuyers. The article mentions the top 8 States that have this problem.
I was a real estate broker in Florida with my own brokerage for 20 years, I have never seen anything like the last few years. Home prices at least doubled, and some homes tripled in price. Little 2 bedroom starter homes with 600 square feet that used to be priced at $60,000 to $75,000 were within a few months selling for $150,000 to $175,000. The increase in prices were so sharp I likened it to the Space Shuttle launch.
Fuelling this increase were exotic mortgages. Mortgage lending requirements were loosened so much that people who could not afford these prices were approved anyway with an exotic package of “teaser” rates that homebuyers didn’t understand that allowed an artificially low mortgage payment for a few years.
When I left Florida in September most of the homes for sale were in foreclosure. The value of the homes had plummeted. If the sellers wanted to sell they had to offer their home as a “short sale”. This means offering your home for sale for less than the mortgage value. The little starter home that has a mortgage of $150,000 could sell for as little as $50,000. This means a $100,000 loss for the bank and ruined credit for the home seller.
I have read many articles as to why there is a shortage of home buyers. Most articles stop short at the real reason there is a home buyer shortage.
The Florida Association of Realtors recently concluded that the real estate market's problems were caused by buyers who were “sitting on the fence” who refused to buy. While that may be true, it's not the reason there is a widespread shortage of buyers.
Are buyers afraid to buy! Probably. Home prices are dropping and it’s hard to tell if they have reached bottom. I don’t think this is the reason, however, because the price drop is not as steep has it has been, and if you live in a home for the next 5 years home values should stabilize.
Here is the number 1 reason that the US is running out of homebuyers, and I have not seen this addressed anywhere yet.
1. Many home sellers are in foreclosure!
2. Home sellers usually become home buyers.
3. They are unable to get another mortgage because of their foreclosure and their ruined credit.
4. So.....they are unable to buy another home.
5. These previous home owners become renters instead of buyers.
It's that simple!