Falling prices, low rates prod California homebuyers
ShareThisBy Jim Wasserman
jwasserman@sacbee.com
Published: Wednesday, Jul. 8, 2009 – 12:00 am | Page 8B
A new survey of California homebuyers shows that nothing prods behavior like falling prices and low interest rates.
Among 1,400 buyers surveyed statewide by the California Association of Realtors:
• 68 percent said price decreases finally set them in motion to buy a house.
• 39 percent said lower interest rates helped them move to a “better location.”
• 23 percent cited the likelihood of rising interest rates as a reason to get off the fence.
First-time homebuyers especially responded to falling prices in distressed inland areas such as Sacramento, the Central Valley and the Inland Empire of Southern California. Statewide, first-timers accounted for 38 percent of sales – twice that of the same survey a year earlier.
“It’s just a dramatic improvement in housing affordability,” said CAR’s Chief Economist Leslie Appleton-Young. “These are individuals who haven’t experienced a loss. They don’t struggle with a home to sell.”
The 86-page report was CAR’s 10th annual look at homebuyer behavior, a span running from housing boom highs to the bust that has followed. Released Tuesday, it consists of telephone interviews with Californians who bought existing houses in the second half of 2008, a time when the economy stumbled, foreclosures multiplied and bank repos became abundant.
Results showed that 51 percent of buyers bought homes with a history of distress. Inside that category, 38 percent bought bank repos and 13 percent bought “short sales,” homes in which lenders accepted less than owed to avoid higher costs of foreclosing. The other 49 percent of those surveyed bought homes from individual sellers, a category known as “traditional.”
Collectively, those buying repos reported the hardest time getting financing. They rated their level of difficulty in getting loans at 8.9 when asked to rank it on a scale of one to 10.
Yet those buyers were often investors, and more savvy than others about mortgage products. The CAR survey said three in five repo buyers used adjustable-rate mortgages and most claimed to understand their loan terms.
By contrast, 88 percent of loans used to buy traditional homes were fixed-rate mortgages. Nearly a third of these borrowers, however, claimed afterward they didn’t fully understand the terms.
Buyers also reported longer waits to close escrow. Just 37 percent said they closed on time; it was 55 percent in 2006.
Other key findings:
• 26 percent of buyers plan to live in the home for two to three years; 44 percent three to four years. Thirty percent aim to stay up to five years.
• 84 percent of buyers used the Internet as the key tool in their house hunting.
CAR said its survey results have a margin of error of 2.6 percentage points at a 95 percent confidence level.
