Boots on the ground perspective: move-up buyers are getting the short end of the real estate stick

As we all know, lending conditions are currently favorable for buyers. Rates are low, and FHA loans are not nearly as restrictive as they've been in the past. While lenders favor buyers with large downpayments, FHA allows 3-1/2% down on a purchase, and there are 10% down loans and even some 5% down loans (hard to qualify for, but still).

Unless you're a move-up buyer, e.g., somebody who owns a home but would like to move to a larger house. Many move-ups need to sell their homes in order to buy a new one. Bridge loans are uncommon. And it's extremely difficult to pull equity of your existing home for a down payment, because so many people have suffered such equity erosion lately. Saving money and having a large nest egg for a down payment is a nice thing, but who do you know that has thousands and thousands of dollars sitting around for that?

To me, in my market, this is where the bottle-neck is. Lower-priced homes have been selling quickly to first-time buyers. It's the people who are trying to move up from their first-time purchase that are being stymied.

I think the solution will be for lenders to begin giving bridge loans again, if equity warrants it. Or even making 100% loans to buyers with excellent credit.

Happy New Year! And prediction for 2009.

I hope 2009 is a great year for everybody! Here's my residential real estate prediction for the Los Angeles area: Move-up buyers (people who would like to move to larger homes) are going to be hurt by the current real estate climate. First, they will likely need to sell their existing homes in order to qualify for a loan for a new property. That's going to be hard, unless they've owned their current homes for over four years as their equity has diminished and they may even be upside-down. Second, there isn't a great supply of homes to move up to -- the existing supply of homes for sale are condos and other first-time buyer-type homes.