Since we are in such a buyers market many people think it would be easy for anyone to buy a home right now in Bakersfield due to the large number of homes available, low interest rates and sellers offering many incentives. Yet, this is simply not the case for many young adults looking to buy their first home. These days, even though it is a buyers market, it is increasingly difficult for young adults to afford a mortgage payment.
Many marginal buyers got swepped up into the realty boom of last year and used exotic mortgages with low initial rates to purchase their first home. Many others are simply unwilling to accept a mortgage contract that they cannot pay with one half of a couple’s paycheck. Many of those marginal buyers who used the exotic mortgages to afford a home are now slipping into the unaffordable realm as their rates keep adjusting upwards. Yet those who wouldn’t pay a majority of their incomes to own a home are still stuck renting.
Today’s economy is shifting and many young adults in the Del Kern area are not capable of starting and sustaining a family, building a career, and saving money the same way generations of the past have. One of the issues has to do with the rising cost of higher education. Tuition at public universities has tripled in the past thirty years and the amount of debt that young adults average after graduation is significantly higher than it was 10 years ago. In addition to this, incomes for young adults has been on the decline for years and employer sponsored benefits are evaporating as well.
Rising rental costs is also a major contributer to young adults’ inability to afford housing and raise a family the way people have done in the past. A growing percentage of young adults are now faced with the reality that they have to pay over 30% of their income, which is the standard threshold of affordability, on their rent. All these things combined are increasing the amount of time it is taking young adults to save for the down payment of a home. Many others are still living check to check, week to week.
Many people are pointing to the new 110th Congress to alleviate many of the economic pressures facing young adults. This is a major problem growing in American Society and we can only hope that the Congress helps alleviate the financial burden facing young adults.
New home building, which has been one of the weakest sectors of the American economy, has shown some signs of life recently with a strong month of November. New home sales exceeded the forecasted rate of sale by a good margin during the month. Previously, the median price of homes sold showed declines throughout the fall because there were so many homes available on the Bakersfield market. The supply of new homes for sale continued to get larger and even set a new record in Del Kern.
The pace of new home sales is down considerably from the ridiculous sales rate of a year ago but is up from the slump we saw in July. Even with this good news for sellers, there is more bad news. There is still a major weakness in the home market. There is way too much inventory on the market and not nearly enough demand. When these two factors are much more closer then we will see home prices, and sales, increase. This good news from the month of November, however, does show that the market is beginning to stabilize a bit.
None of this spells a price increase. All the news coming from builders and realtors says they are still offering incentive and price breaks in some form of another. The homebuilding slowdown is a real drag on the economy. Most large builders have earnings below forecasts and new forecasts show continued decline for the foreseeable future.