Back in March 2020, a computer programmer and her boyfriend, a finance specialist, set out confidently to visit an open house in suburban Boston. But arriving at the 120-year-old property, the young couple were stunned to realize that 60 other would-be buyers were also there to view the place.
“This was the beginning of the pandemic and big-time multiple bidding. This couple was totally surprised by the strength of the market. They thought the turnout at the open house was a fluke and prices would soon collapse due to COVID-19. But the opposite happened,” says Richard Rosa, the real estate broker who represents the couple.
Indeed, the pandemic-era demand for spacious housing, along with a severe shortage of supply, have hoisted home prices to record levels.
“It’s been a sobering couple of years. Prior to the pandemic, the market was competitive. ... We’re still surprised to see any house attracting fewer than 10 offers,” says Rosa, president of the National Association of Exclusive Buyer Agents (naeba.org).
So substantially did home prices rise in 2021 that a recent economic analysis by Zillow, the national real estate company, identified 146 U.S. locales where the typical home listing now tops $1 million.
“The surge in demand for housing last year sent home values skyrocketing, even in places where prices already were sky-high,” says Jeff Tucker, a Zillow senior economist.
Two years into their quest, the computer programmer and financial specialist have yet to close on a property. But they’ve moved forward toward their goal by saving more money for a larger down payment.
Those who’ve competed in multiple-bidding contests know that stockpiling cash in their savings accounts can make them stronger contenders.
“While it’s true you can buy a house with just 3% to 5% down, sellers take you more seriously if you have 20% down,” Rosa says.
Meanwhile, rising inflation, as tracked by the Federal Reserve, has recently made it ever more challenging to save money, especially on gas and food, as well as such essential services as child care and doctors’ visits. What’s more, the war in Ukraine has only worsened the inflationary outlook.
Another factor making it harder to save is that technology is playing an ever-greater role in our lives, according to Judy Lawrence, a New Mexico-based budgeting coach.
“Can you imagine the days when you didn’t need cellphones, basic cable and internet connections?" asks Lawrence, the author of “Budget Kit: The Common Cents Money Management Workbook.”
Lawrence advises her readers to place a high priority on cutting out needless interest charges by systematically paying down consumer debt. On her website, moneytracker.com, she offers a wealth of free personal finance advice, including debt reduction tactics.
Here are a few pointers for those struggling to save for a down payment:
-- Establish a trackable spending and savings plan.
Before deciding on the categories where you can cut spending, it’s important to get a clear sense of where your money is now going. That doesn’t necessarily mean you have to buy budgeting software, such as Quicken, or use a free online money tracking service, such as Mint (mint.com). Personal finance specialists say that for many people, a simple pencil-and-paper system may be the best option.
Whatever tool you choose to track spending, Lawrence suggests you examine your recent checking account and credit card statements and then write down what you’ve spent for at least the last two months -- breaking out your expenses into two broad groups -- mandatory and discretionary.
Mandatory outlays include such items as car payments, insurance bills and school tuition charges. Discretionary items include restaurant charges and clothing purchases. Once you’ve tracked your past spending, search within the discretionary section for low-priority items that could be cut.
-- Avoid budget-busting behavior that could sabotage your goal.
Lawrence advises people attempting to stay on a tight budget to carry a small notebook to record all their expenses as they occur. This should increase your awareness of where your money is going. Then make sure you enter all these amounts in your budget book or online program.
“If you do it every day, it usually takes just five minutes to update your spending plan,” she says.
Are you an impulse buyer who gets a high from buying clothing, shoes, electronic gadgets or other discretionary items, and you later wonder why you made all those non-essential purchases?
If so, Lawrence recommends you follow the “24-hour rule.” When going shopping (for anything but food), leave your cash and credit cards at home. Go to the store and make your selections but allow yourself at least one full day to decide which choices are truly important and fit in with your overall spending plan. You can then return to the store to purchase just these.
-- Reflect on your grocery-buying habits.
Lawrence says people often fail to notice how much of their grocery money goes to waste.
“Buying a lot of groceries (provides) a feeling of security for many people. They buy food mindlessly and then fill their refrigerator and cabinets with items that are never eaten, including perishables,” she says.
Many people intent on saving for a house -- or for any purpose -- are usually wise to avoid shopping for food at “big box” discounters that sell to customers in bulk.
“You should only use these stores for your food purchases if you plan your menus carefully to ensure that food in these large containers doesn’t get thrown out. Otherwise, you’ll waste money rather than saving it,” Lawrence says.
(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)