I believe the attitude towards buying a home has been permanently changed due to the housing crash. Similar to those who grew up during the Depression with a changed mindset about finances, middle class buyers and sellers now have a different view towards a home investment. This was obvious to me when dealing with three buyers over the past couple of weeks.
Buyers #1: Young professional couple, newly married, late 20s. Both very career oriented. They have money saved for a down payment. Typically, a couple like this would buy a smaller starter home. While talking about what they are looking for in a house, they stated this: "We want to buy one house only. It's too expensive to move every few years. We've seen our friends buy 'starter homes' within the past five years, now they want to move up but don't have any equity and the price depreciation means they are stuck where they are for the next several years." By purchasing one house now, larger than a starter house, they can make improvements as they go and have enough room for kids when they come along. One purchase is all they plan for.
Buyers #2: Another professional couple, in their mid 30s. These are potential buyers--but they are stuck. They bought a nice home in a desirable Brookside neighborhood five years ago. With no children, they have decided they would like a smaller home--although their home is not large, it's average size for the area. Still, with the shaky economy and even though they have stable jobs, they want to downsize to a smaller place with lower payments--I suspect for the security of having more cash flow for other things they would like to do in life. They mentioned 'a smaller home means less utility payments and upkeep' . They realize their house hasn't appreciated and because they had a 'no money down' loan, they are upside down. Housing as an investment that appreciates? Nope, too risky to try that again.
Buyers #3: An empty nester couple, in their 60s, plan to retire in five years. Both have generous pension plans and currently earn over $150K per year and their current home is paid off. They could afford a very nice home in a maintenance free, suburban community. What do they want to buy? A smaller $200,000 single family home in an older neighborhood, which they will take care of themselves. At the right time, they will give the house to their son. During our conversation, they mentioned again the extra costs associated with a larger home, moving multiple times and the desire to have a home to 'pass on' because 'you just don't know if the economy will recover' and they want their son to have a place of his own someday. Their son is college educated, was laid off, and can't find work paying what he once earned. He can't see ever saving enough money for a down payment on a home, especially because of student loan debt.
Homebuyers know that if ever there was a time to buy...this is it. But they are being extremely cautious about the process and decision. It's not so much of an emotional decision anymore--there is much more emphasis on the investment and potential return. The desire to own a home is still strong--but if it's not a financially sound decision, the buyer will wait...and wait...and..maybe buy, maybe not. I understand this new mindset with buyers and would never advise someone to buy something they can't afford. Actually, I tell buyers "the bank will qualify your for more of a house payment then you are probably going to be comfortable with. Don't get sucked into buying a more expensive house just because you can". Still, this attitude change with homebuyers certainly affects the way I approach and deal with potential customers.
This is the 'new normal' atmosphere with middle class homebuyers. Do you see it with your customers?