Now that summer has morphed into fall and the prospect of a COVID-19 vaccine is in sight, many young Americans are eager to make up for lost time toward their big life goals. Topping many lists: buying a first home.
The urge to move forward to homeownership has been intensified by alluringly low mortgage rates. But housing economists say that in many cases rising property prices are canceling out the added buying power that comes with low rates.
For wannabe owners, the underlying problem is an extreme shortage of available homes at the affordable end of the price spectrum, says Daryl Fairweather, chief economist at Redfin, a national real estate firm.
“Because there hasn’t been an increase in the number of homes for sale since rates started dropping with the onset of the pandemic, many buyers end up competing for the same homes, driving up prices,” Fairweather says.
Those competing forces have made the current market a wash for many homebuyers -- especially those seeking a single-family home in a popular suburban neighborhood, though the picture is more positive for those wanting a condo.
“Buyers searching for condos can find a better deal, both on overall price and mortgage payments, because most condos are less competitive than single-family homes as people move out of densely populated urban areas,” Fairweather says.
Regardless of the market conditions they’re facing, many young buyers -- restless after months of pandemic restrictions -- are determined to plow forward with their purchasing plans, according to George Ratiu, a senior economist for Realtor.com, a home-listing company.
He says one sure sign of confidence on the part of home sellers involves the stunning rise in the list prices they’re posting.
“Currently, median listing prices are 10.6% higher than a year ago. Meanwhile, the low supply of homes for sale has meant that properties are coming off the market in record time,” according to Ratiu.
Under such competitive circumstances, one risk facing frustrated young buyers is that they’ll allow their judgment to be influenced by the competition, especially if they’ve lost out on one or more properties to rival bidders.
“Don’t lose your head in the process. You never want to pressure yourself into buying an inappropriate property or paying way too much just to beat out other buyers,” says Tom Early, a veteran real estate broker.
Although mortgage rates are currently very attractive, Early cautions novice buyers against rushing into any deal solely to take advantage of low-cost home finance.
“There are a multitude of lifestyle factors related to the home you buy beyond mortgage rates. Because where you live is just a huge element in your happiness, take your time,” says Early, a past president of the National Association of Exclusive Buyer Agents (naeba.org).
Here are a few pointers for buyers:
-- Consider the most spacious place your finances will allow.
Clearly, you’ll want to postpone home-buying if your future is uncertain. Suppose, for example, that you or your spouse are considering law school in another city or a potential out-of-state job move. Contrast that with a couple holding down two steady jobs.
Early urges first-time buyers to look beyond their present situation.
“Forget buying a home the way you’d buy a pair of shoes -- to fit your current needs. In the ideal world, you’ll choose a place where you could live comfortably for at least seven to 10 years, giving you the option to remain there for as long as you want without outgrowing the house,” Early says.
-- Place a high priority on school quality.
Right now the parents of school-age children are grappling with the tough trade-offs involved with online versus in-person learning for their kids. But families plotting a home purchase also face longer-term issues. They’ll want access to quality schools well after the pandemic is over.
In most areas, it’s now easy to find online comparisons of schools based on test scores. That’s because most school systems freely disseminate test results on their websites. Also, there are a number of independent websites that use publicly available data to rank schools, says Kate Barrington, who blogs for one such site: Public School Review (publicschoolreview.com).
Under normal circumstances, agents recommend that home shoppers make in-person visits to schools in a neighborhood of interest. But the pandemic is making such site visits difficult. Thus, Barrington encourages buyers to reach out to parents’ groups through social media.
-- Always keep your eye on resale value.
As Early notes, rising demand for affordable properties among young adults means available homes will likely remain in very short supply going forward.
“No matter how long you intend to stay in the home, I strongly recommend you buy with resale in mind. A house with several bedrooms should prove more marketable than a smaller one, especially now that many people want two dedicated home offices,” Early says.
The bathroom count also matters.
“Remember that very few people, including singles, want to live in a place with just one bathroom. I’ve never seen a house with too many bathrooms,” he says.
(To contact Ellen James Martin, email her at email@example.com.)