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Fewer first time home buyers


By tovarichpeter   Follow   Tue, 25 Dec 2012, 10:25am PST   2,732 views   55 comments
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http://www.nytimes.com/2012/12/23/realestate/mortgages-fewer-first-time-buyers.html?src=rechp&_r=0&gwh=24F2BA332D0F81C76062C5EEEF256405

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bmwman91   Fri, 28 Dec 2012, 8:12am PST   Share   Quote   Permalink   Like   Dislike     Comment 16

Kevin says

Honestly, if you have kids, leave the SFBA. I'm biased, but I recommend seattle. It's a wonderful place to raise kids.

A number of my coworkers transferred to my employer's offices up in that area. The houses are cheaper and the schools are better. The weather kind-of sucks, but there is an incredible amount of stuff to do. If one is inclined to hike/bike/kayak/ski, it is vastly better up there; just invest in rain gear and wear more clothes. People generally seem nicer and more polite in the PNW, too. I've been going up there every week for the last 11 months and am starting to think about moving.

Kevin   Fri, 28 Dec 2012, 8:22am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 17

The weather only sucks half the year, which is about the same as most northern states.

The overall environment is much nicer though. Everything is green, there's a frickin' rainforest an hour away, and you can see mountains, trees, and water from just about any home in the area.

People are nicer. It's mostly folks who have kids and live normal lives, not the 24/7 overstressed silicon valley mindset. While there are big tech companies here, there are also good blue collar employment opportunities, which means mixed incomes.

Most importantly, seattle has actual local culture, something SFBA can't claim. There's nothing in SFBA that really compares to the fremont area or pike place market.

It's certainly more expensive than the midwest, but it's nothing compared to SFBA.

The only downsides are the microsoft people and lack of sunlight in winter (ok, some of the MS people are alright)

lostand confused   Fri, 28 Dec 2012, 8:30am PST   Share   Quote   Permalink   Like   Dislike     Comment 18

I also hear WA state has no state income taxes? How are the property taxes?

Kevin   Fri, 28 Dec 2012, 9:30am PST   Share   Quote   Permalink   Like   Dislike     Comment 19

lostand confused says

I also hear WA state has no state income taxes? How are the property taxes?

No income tax.

Sales tax @ 9.5%

Property taxes are about average. Most counties use relative assessments rather than absolute assessments, so your taxes can go up even if the value goes down (and can go down even if the value goes up). I'm paying $5000/year on a property with a FMV of $585k and an assessed value of $440k FWIW.

The upside is, of course, that school funding doesn't tank when the economy does. On the east side suburbs, the three major school districts are simply amazing.

The only real bad tax situation is the "B&O" tax. Instead of taxing businesses on their profits, we tax them on their revenue, which seems kind of dumb to me. Even companies that take losses have to pay taxes.

All together, though, taxation is very modest, and I feel that we get a pretty good value for our tax dollar. Well, as long as you're not a homeless black man. Seattle cops like to shoot those folks.

bmwman91   Fri, 28 Dec 2012, 9:41am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 20

Kevin says

People are nicer. It's mostly folks who have kids and live normal lives, not the 24/7 overstressed silicon valley mindset.

Wait, you mean that living-to-work is NOT normal? Isn't "raising kids" what you pay someone else for until they are old enough to be raised at school?

Kevin says

Most importantly, seattle has actual local culture, something SFBA can't claim.

Oh god, the SFBA and "culture". So many people insist that there is a plethora of culture here, when in fact there is little-to-none. Instead there is a large group of people that THINK that there is culture and that seem to believe that thinking that there is culture here means that it actually exists, when in fact SF's biggest "thing" is its blind adherence to "progressive" ideals that end up being anything but in practice. The SFBA is one giant concrete suburb. SF itself is sort of a joke as far as "international metros" go, but that doesn't deter some from pontificating about how it is a world-class city. It seems to be mostly white people that probably need to travel more that talk about this. The South Park episode about the Prius actually sums up life in SF pretty well.

(it is not ALL stupid douche-baggery in SF, and the place has its pluses too)

Kevin says

The only downsides are the microsoft people and lack of sunlight in winter (ok, some of the MS people are alright)

lol
The native locals have no love for the MS people, at least according to a couple of friends that grew up in eastern WA. I think that they blame them for wreaking havoc on the cost of living and political climate of the region (rightfully so). In my visits there I have encountered some MS people, and a couple did indeed carry a superiority complex of some fashion since they work for the biggest company there (other than Boeing). Seems weird to me since living and working in the SV is more of a "I'll work for the highest bidder and I have my pick" atmosphere.

People there are nice and polite. I feel like a big asshole whenever I am driving there (because I am). "Why in god's name are you going the speed limit in the left lane?!?! Fuuuuuuuuuuuuuck!" The 4-way stop always cracks me up, "you got here before me and are waving me through OK I'll take it." CA drivers are to WA drivers as Boston drivers are to CA drivers.

SJ   Fri, 28 Dec 2012, 11:02am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 21

I am happy with my 10 minute commute to work and disposable income to take nice vacations and learn new hobbies and to invest in my retirement. When I retire I plan to leave the USA anyways for South America.

Kevin   Fri, 28 Dec 2012, 2:11pm PST   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 22

SJ says

I am happy with my 10 minute commute to work and disposable income to take nice vacations and learn new hobbies and to invest in my retirement. When I retire I plan to leave the USA anyways for South America.

I don't understand this mentality.

My retirement plan is to die doing something dangerous. My kids don't need me to leave anything for them.

Peter P   Fri, 28 Dec 2012, 2:42pm PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 23

Saving for retirement is a fragile way to live. You are relying on things staying relatively the same. You are making too many questionable assumptions.

Diversification is a false prophet. Unless you can profit from shocks and unexpected changes, no plan will survive the future.

bmwman91   Fri, 28 Dec 2012, 2:55pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 24

Peter P says

Saving for retirement is a fragile way to live.

What other options are there besides saving for retirement, working until death and Kevin's "go out with a bang"? Saving for retirement seems like the one that actually has some possibility of involving retirement.

Peter P   Fri, 28 Dec 2012, 3:02pm PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 25

bmwman91 says

What other options are there besides saving for retirement, working until death and Kevin's "go out with a bang"? Saving for retirement seems like the one that actually has some possibility of involving retirement.

You have to get rich enough to not worry about retirement.

Saving has no "convexity" in it. Saving does not benefit from changes.

Of course spending your nest-eggs would be ill-advised. But I afraid the only way not to go down is to move up.

And the best way is to make money from doing things you love. Do you really want to spend 40-50 years working on things you hate just to get away?

thomaswong.1986   Fri, 28 Dec 2012, 3:35pm PST   Share   Quote   Permalink   Like   Dislike     Comment 26

fedwatcher says

New Renter,

The San Francisco Bay Area on relative terms has rising employment with high paying jobs. So its housing prices should buck the trend.

we hire more outside of SV than locally.. with only 5-10% locally the hiring are much stronger in other states where SV companies have operations. And of course with lower home prices and much friendlier local govt there is plenty of motivation.

bmwman91   Fri, 28 Dec 2012, 4:55pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 27

Peter P says

You have to get rich enough to not worry about retirement.

Oh, is that all? For a minute there I thought that you were going to suggest something difficult, but getting rich...easy!

Peter P says

But I afraid the only way not to go down is to move up.

Not quite following...so the only way to not be poor is to be rich instead?

Peter P says

And the best way is to make money from doing things you love.

All facetiousness aside, I agree 100%.

SJ   Sat, 29 Dec 2012, 5:27am PST   Share   Quote   Permalink   Like   Dislike     Comment 28

Well its better to at least save and invest now than to wait until one is 65 and broke depending on social security (if it still has funds!). Why piss away money when you might need it later on? Having an emergency fund is prudent.

bmwman91   Sat, 29 Dec 2012, 5:45am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 29

SJ says

Having an emergency fund is prudent.

That is what I was raised to believe, and it is what I do. Sadly, our current monetary policy does everything possible to discourage it.

SJ   Sat, 29 Dec 2012, 9:33am PST   Share   Quote   Permalink   Like   Dislike     Comment 30

Agree the thing is government punishes savers and small investors.

Kevin   Sat, 29 Dec 2012, 9:37am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 31

How are "small investors" punished?

Government discourages saving because saving is poor planning. Buy bonds if you're afraid of volatility.

Peter P   Sat, 29 Dec 2012, 11:51am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 32

Kevin says

Buy bonds if you're afraid of volatility.

Hello? What do you mean? Bonds can be just as volatile.

If you are afraid of volatility, you are doomed, period.

A good investment plan takes advantage of volatility and thrives on shocks.

Kevin   Sat, 29 Dec 2012, 12:12pm PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 33

Peter P says

Kevin says

Buy bonds if you're afraid of volatility.

Hello? What do you mean? Bonds can be just as volatile.

If you are afraid of volatility, you are doomed, period.

A good investment plan takes advantage of volatility and thrives on shocks.

Bonds are no more volatile than a savings account.

Peter P   Sat, 29 Dec 2012, 12:14pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 34

Kevin says

Bonds are no more volatile than a savings account.

LOL!!!

bmwman91   Sat, 29 Dec 2012, 3:53pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 35

Kevin says

Government discourages saving because saving is poor planning. Buy bonds if you're afraid of volatility.

If saving is poor planning then it must be because there is a lack of faith in the US dollar's long term value. If the US dollar is unworthy of long-term faith, then why on earth would bonds, issued by the same treasury in the same government and denominated in dollars, be any more trustworthy?

The fact that "saving is poor planning" seems to be a very popular sentiment says volumes about just how fucked up our economy has become. I guess this is the inevitable outcome of a system that requires growth just to maintain the status-quo. Growth is unsustainable.

Kevin   Sat, 29 Dec 2012, 5:15pm PST   Share   Quote   Permalink   Like   Dislike     Comment 36

bmwman91 says

If saving is poor planning then it must be because there is a lack of faith in the US dollar's long term value.

Nope, just because you can earn better returns that are just as safe from plenty of other sources. 2 year treasuries are currently yielding 4x the return of any savings accounts.

The only situation that could possibly result in the bonds being an unsafe investment would be the government defaulting. If they're defaulting, what makes you think FDIC would pay out on that savings account?

bmwman91 says

The fact that "saving is poor planning" seems to be a very popular sentiment says volumes about just how fucked up our economy has become.

Saving has been poor planning relative to any other form of investment for as long as there has been government-issued debt.

Anyone with two brain cells to rub together who wants to build up their wealth without giving it much though should be choosing either:

- Bonds (for the risk averse)
- Mutual funds (for the long term best yields)

If you're feeling more adventurous and/or don't mind being actively involved you can buy rental properties, invest in specific stocks or commodities, invest directly in a small company, or maybe try an annuity.

Sticking money into savings doesn't benefit anybody but the bank. It's slightly safer than sticking your money under the mattress, but not by much.

bmwman91   Sat, 29 Dec 2012, 5:43pm PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 37

Kevin says

2 year treasuries are currently yielding 4x the return of any savings accounts.

Sorry, that is completely false. The APY on my ING savings account is 0.75%. Per the link below, 2 year T-notes have a yield of ~0.27% right now, which is an effective APY of ~0.135%. Thank Benny B for that one.

http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

I sort-of agree that mutual funds are a decent place to park money to grow it. It makes sense when the economy appears stable. As of this very moment, I am hesitant to put any of my after-tax cash into the Wall Street casino. We'll see how the fiscal cliff and debt ceiling stuff turns out over the next couple of months. I expect more can-kicking.

My 401k is spread throughout various mutual funds, and I can afford to take some fairly big hits there since my employer does nice contribution matches. That sucker gets maxed-out per IRS guidelines since it is both pre-tax and presumably will average 7-8% yields over the next 40 years until I start thinking about retirement (at ~70). Certain bio-med companies are looking good though, being that the aging baby boomer population is going to need a lot more care than we presently have capacity for. So, I can't claim to be 100% in cash right now. I'll take my chances in mutual funds since, well, a lot of it is "free money" from my employer anyway.

SJ   Sun, 30 Dec 2012, 1:21am PST   Share   Quote   Permalink   Like   Dislike     Comment 38

No debt, 401k in stocks/bonds as well as cash, CDs and gold/silver for my investment savings.

B.A.C.A.H.   Sun, 30 Dec 2012, 2:59am PST   Share   Quote   Permalink   Like   Dislike     Comment 39

fedwatcher says

First time buyers drive the traditional move-up buyer

fedwatcher, are you an immigrant? Just asking.

B.A.C.A.H.   Sun, 30 Dec 2012, 3:02am PST   Share   Quote   Permalink   Like   Dislike     Comment 40

Kevin says

People are nicer. It's mostly folks who have kids and live normal lives, not the 24/7 overstressed silicon valley mindset.

Kevin, are you a native of the Bay Area? Just asking.

Peter P   Sun, 30 Dec 2012, 3:03am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 41

bmwman91 says

Kevin says

2 year treasuries are currently yielding 4x the return of any savings accounts.

Sorry, that is completely false. The APY on my ING savings account is 0.75%. Per the link below, 2 year T-notes have a yield of ~0.27% right now, which is an effective APY of ~0.135%. Thank Benny B for that one.

Kevin, do you even understand how bonds work?

B.A.C.A.H.   Sun, 30 Dec 2012, 3:10am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 42

bmwman91 says

The native locals have no love for the MS people

"Tech People",

.... I think that they blame them for wreaking havoc on the cost of living and political climate of the region (rightfully so).... some MS people,

"Tech People"

and a couple did indeed carry a superiority complex of some fashion since they work for the biggest company there

"in Silicon Valley Tech".

From what you guys say, Seattle sounds very much like the Bay Area if you ask me.

Kevin   Sun, 30 Dec 2012, 3:20am PST   Share   Quote   Permalink   Like   Dislike     Comment 43

Woah, ING is crazy. That's more than 10x what I see from wells, HSBC, and citi. What's the catch?

@racist guy: I'm from Ohio.

The 'natives' in sv can't claim to hate tech anymore, since tech has been the lifeblood of SV for an entire generation now. Seattle still has Boeing and coffee.

B.A.C.A.H.   Sun, 30 Dec 2012, 3:38am PST   Share   Quote   Permalink   Like   Dislike     Comment 44

Kevin, I agree we don't "hate" tech. But the few of us still here don't like the economic distortions ya'll have made out of our region.

B.A.C.A.H.   Sun, 30 Dec 2012, 3:41am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 45

And another thing, just how much "technology" is there sitting at a keyboard typing code?

They still meld science like physics and chemistry into solving problems and making things ("real" technology) at places that actually make things, like Boeing.

Peter P   Sun, 30 Dec 2012, 3:44am PST   Share   Quote   Permalink   Like   Dislike     Comment 46

Much of "technology" going on here in the silly valley is just plain silly.

Software engineering has as much engineering as financial engineering.

But anyway, technology is a superficial progress anyway. People are spending way too much effort on it.

bmwman91   Sun, 30 Dec 2012, 4:08am PST   Share   Quote   Permalink   Like   Dislike     Comment 47

Kevin says

Woah, ING is crazy. That's more than 10x what I see from wells, HSBC, and citi. What's the catch?

@racist guy: I'm from Ohio.

The 'natives' in sv can't claim to hate tech anymore, since tech has been the lifeblood of SV for an entire generation now. Seattle still has Boeing and coffee.

The downsides are that there are no ATMs and it can take up to 2 business days to transfer funds to a more liquid account like a Wells Fargo checking account. Back in 2006, I was getting 5% APY. So the other potential downside is that the rate of return floats, which can be good or bad.

Kevin   Sun, 30 Dec 2012, 1:42pm PST   Share   Quote   Permalink   Like   Dislike     Comment 48

All savings accounts float rates though. You need a CD or bond for guaranteed returns.

Peter P   Sun, 30 Dec 2012, 1:47pm PST   Share   Quote   Permalink   Like   Dislike     Comment 49

Chasing guaranteed return is a recipe for guaranteed disappointment.

bmwman91   Sun, 30 Dec 2012, 1:53pm PST   Share   Quote   Permalink   Like   Dislike     Comment 50

Kevin says

All savings accounts float rates though. You need a CD or bond for guaranteed returns.

True. "Standard" savings accounts have such low yields that it almost doesn't matter. If my rate of return went from 0.08% to 0.01% on a typical middle class cash-stash, I could make up the difference by skipping my morning coffee a couple of times a month!

Hindsight is 20/20.....I should have locked in all of my money into a 10 year CD in 2005 at 7%. Oh well.

Kevin   Sun, 30 Dec 2012, 1:58pm PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 51

I put all my money in meth labs and whore houses.

bmwman91   Sun, 30 Dec 2012, 2:18pm PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 52

Kevin says

I put all my money in method labs and whore houses.

Smart. Prostitution is the oldest profession, and will probably be the last one left someday. Meth addicts will go to any length to pay for their fix. Sounds like you have a solid plan! Have you considered investing in Chinese organ harvesting cartels? Remember, there is safety in diversification!

YesYNot   Sun, 30 Dec 2012, 11:26pm PST   Share   Quote   Permalink   Like   Dislike     Comment 53

Peter P, you appear to be on Kevin's ignore. Anyway, bond funds are volatile. Buying gov't bonds and holding to maturity is a fixed yield. A fixed yield does not guarantee maintaining buying power, but it pretty much guarantees face value.

EastCoastBubbleBoy   Sun, 30 Dec 2012, 11:57pm PST   Share   Quote   Permalink   Like   Dislike     Comment 54

to get back to the OP. I'm not surprised that 1st time buyers are on the decline. Let's think about who your typical first time buyer is. They typically are at the lower end of their earning potential, most have at least some student loan debt, and few have any significant savings.

Historically, the first home was a “transitional” home – a small condo, a multifamily in a not so nice neighborhood, or a small SFH. It was a way to get into the market, but it wasn’t a home that you could necessarily live in for 15+ years and raise a family in.

As of right now, these lower tier homes are beings scooped up by investors, with some Wall Street hedge funds buying in quantity, further reducing supply of the entry level housing stock.

Personally, I think the impact of student loan debt on first time home buying is underrated - it probably is a bigger factor than most give it credit for. Heck it kept me out of the market for almost ten years. I had to pay down my student loan debt before I could even think about applying for a mortgage. (at least, by traditional lending standards, which as we know were all but abandoned between 2003 and 2008.

Also, I'd also be interested to see data on the average age of the first time buyer - my bet is that it has increased over the past few years as younger families are forced to put off that first purchase.

B.A.C.A.H.   Fri, 4 Jan 2013, 2:03am PST   Share   Quote   Permalink   Like   Dislike     Comment 55

Kevin says

People are nicer. It's mostly folks who have kids and live normal lives, not the 24/7 overstressed silicon valley mindset.

B.A.C.A.H. says

Kevin, are you a native of the Bay Area? Just asking.

Kevin says

@racist guy: I'm from Ohio.

As I thought, you are not from from the Bay Area.

See, there are many friendly non-tech-frenzied folks in neighborhoods in the region. I live in such a neighborhood like that with neighbors and friends like that.

Your description of how much it costs ($4k or something like that) to rent a house near "decent" public K-12 speaks for you: you have formed your opinion about the region based on your experiences in Fortress Neighborhoods that are priced and dominated by like-minded Recent Arrival Techies. If you would get out more from those "techie ghettoes" you'd see that there are wide swaths in the region with the diversity you described about the Seattle area. You see, we "regular folks with regular jobs" have to live somewhere.

"Racist"? You would be surprised. We are a mixed race household here with mongrel kids.

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