Hinge Buyers.... What is it and will it catch on???

Friday, July 20, 2007

It's a buyer's market. How often have we heard that lately? I have to say though, I'm not sure about all that. I think it's a stale-mate market personally. Here's why:

As Jay Butler pointed out in an article in today's Arizona Republic, Buyers must first be sellers. And as we know, sellers are having a tough time right now. So it's the old "chicken or the egg" question in real estate...what comes first, the buyer or the seller?

Does it all come down to people who are buying that don't currently own a home? Or maybe the second home buyers? It's like a domino theory....there's one buyer that has no contingencies (aka a house to sell before they can close on the home their buying) that starts the effect.

Example:

John Buyer buys a $300,000 home with no contingencies from Jane Seller. Now Jane Seller can buy her move-up home for $400,000 from Susan Sellsalot. Susan Sellsalot can now buy her dream home from Sam Sellnow for $600,000. Sam Sellnow can now start working on his financial goal of becoming an investor. Sam takes the profit from his house and buys an investment property for $250,000 and a personal residence for $500,000. Now we have 2 more buyers in the market...and so on and so forth.

See what I'm saying here?

So now EVERYTHING hinges on good ol' John Buyer. I am right now coining the phrase "Hinge Buyer"....that describes John Buyer in a nutshell. (and if you've heard this term before, let me know. But I think we might be looking at a Jacki Semerau Original here.)

Easy enough, right? There's always first time home buyers out there, right? And if you think about, hasn't real estate been like that from the very beginning? I can see Chris Caveman, needing to upgrade to a larger cave due to his growing family. So he barters with First time cave dweller Dave, previously living in his parent's cave. You see where I'm going, right?

Ahhh....but it's not that easy anymore, now is it? Why not? Here it is...the Real Estate Buzzword of My Blog, SUBPRIME.

With the subprime debacle still in effect, lenders are all too scared to lend their money. Some guidelines are way too strict for John Buyer to qualify. If John Buyer doesn't qualify, then all of those subsequent sales mentioned above don't happen. Leading us to a Stalemate.

As I heard on a real estate radio talk show this week, the pendulum looks to be swinging too far in the opposite direction. So how long do we hold on? Where do we find those first time buyers that DO qualify? What can we do to change the direction?

Post a comment and tell me what you think....where do we go to find the "Hinge Buyer?"