By Kathy McSherry | Ask Kathy
I am a first-time home buyer and 33 years old. My occupation is in the health care industry and I make $86,000 per year. I really want to stop renting and finally purchase a home but I am frustrated with it being a “seller’s market.” My best friend lost out on a home due to multiple offers. Any advice for this type of market and being new to it all?
You are not alone with your feelings of trepidation regarding entering the real estate market in a crazy time. The limited inventory is happening in many areas of the country and driving up the demand, which has slightly increased pricing. If a home is priced right, chances are you will be up against multiple offers.
The best thing you can do is educate yourself about the market and have all your ducks in a row. Make sure you are pre-qualified with a reputable lender so you know what price range you can afford or qualify for and try to be first with a strong offer.
Many times, first-time buyers don’t understand that if they really want a home, they need to consider full price if it makes sense. They are also unaware that there are several pre-purchase home-buying seminars and/or classes that you can take to educate themselves about buying a home.
Ask your Realtor to do the market comparisons in the area and see how many days a home is on the market before it sells. Typically, if a home is sitting in a seller’s market, it is priced wrong or shows bad. Start your search early and be first in line when the right home becomes available.
New buyers entering the market this year are up against those that started last year but still haven’t found anything or buyers that have more leverage and experience. According to CAR Market Matters, there were 3 percent fewer homes on the market in February compared to a year ago, according to a recent report from Zillow, and home values are up nearly 7 percent.
Your age group puts you in the millennial category and this is now the largest represented segment of homebuyers. Studies were indicating that millennials were waiting to enter the real estate market with their first home purchase and choosing to live with their parents.
This has been true, but statistics are now showing that they are considering purchasing as rents have continued to increase and they recognize that interest rates are still very low in comparison to when their parents may have purchased.
Interest rates then were like credit cards and there were also no down payment assistance or first-time homebuyer programs available. The shortage of inventory tends to be in the first-time buyer’s price range or entry-level housing.
One suggestion may be to consider getting into the real estate market but on a smaller scale than what you would like, or slightly lowering your standards.
I read about a young couple in Sacramento that felt like they were getting priced out of the market too quickly so they purchased a smaller condo just to get into the game. They concluded that if they were to stay there two years, they would still be gaining equity instead of renting, and that they would then sell that if possible and try to move up to a slightly larger or nicer home.
I know from personal experience this is how I started with my first home in Las Vegas. Had I not bought that home in 2000 for $110,000, I would not have been able to sell it for $170,000 a few years later and then buy another home for $240,000 and sell it for $320,000 again in a few years.
Yes, I was lucky to get out right before the bubble burst, but many times as a single mother I could survive, if not thrive, because of the money that was in my home. Home ownership saved me.
I admit a business friend and mentor had to push me to make that first step because I had convinced myself that I couldn’t afford it. He said, “if you never put yourself into that next bracket, you won’t continue to stretch and make yourself afford more to make more.” He was right. I broke it down to dollars a day and it was more achievable than I had thought.
Stick with the process, Sarah. Be prepared and line up with an experienced Realtor. And definitely try to get into the game with interest rates still historically low. Good luck.
—Kathy McSherry is a Realtor at Coldwell Banker Residential Brokerage. Email your questions to Kathy@kathmcsherry.com, or call 702-382-9905.