A few months ago, a 39-year-old nurse practitioner from Rhode Island got a great new job offer in Boston. But there’s one major catch holding up her move: She and her husband -- the parents of two school-age kids -- are struggling to find an affordable house in their new community.
“This family doesn’t need a particularly fancy house or a lot of space, just a neighborhood with strong schools. But where they’re looking, most available homes are ‘fixer-uppers’ with serious issues,” says Rich Rosa, the real estate agent representing the couple.
The other issue is that since the couple’s search began, mortgage rates have steadily risen, which has dramatically reduced their buying power.
“They’ve lost more than $100,000 in borrowing capacity,” Rosa says.
Housing specialists like Rosa, who advocate for homebuyers, say an increasing number of purchasers are so gloomy about market conditions that they’ve abandoned their search altogether.
“Mortgage rates well over 6% are spooking homebuyers,” says Taylor Marr, deputy chief economist at Redfin, the national real estate brokerage.
Indeed, “housing affordability is at a more than 10-year low,” says Jerry Konter, chairman of the National Association of Home Builders (nahb.org).
But rather than pulling back entirely from the market, real estate specialists suggest that motivated buyers regroup.
“Even if you’re frustrated and upset, we always tell people to stay the course. You never know when the right house will pop up, and you want to be ready,” says Rich Harty, who with his brother operates a small boutique real estate company in Highland Park, Illinois.
In a rapidly changing real estate market like the current one, Harty stresses the need for advanced planning and the cautious selection of both property and neighborhood.
“You don’t have to stay in high gear all the time. But you should be ready to move forward when the right opportunity presents itself. One positive for buyers in the current market is that there are many fewer bidding wars. So you have more time to evaluate your options,” Harty says.
Here are a few pointers for buyers:
-- Plan ahead before zeroing in on a neighborhood.
It’s not uncommon for buyers to let emotion dominate their decision on where to live, says Michael Knight, a financial advisor affiliated with the National Association of Personal Financial Advisors (napfa.org).
“You’ve got to do plenty of research," Knight says. "Have an informal talk with a few knowledgeable real estate agents in any area you’re considering. Ask them lots of hard questions before making your choice of the best possible community,” he says.
Which neighborhoods are most likely to hold or gain value in the future? Knight says top-quality public schools are critical, particularly now that private schools are out of reach financially for many families.
Access to quality public transit is also high on the list.
When talking to real estate agents, ask them to show you the neighborhood’s amenities on a map. Also, ask them to assemble data for you on sales trends in the community -- including the median time it takes to sell a home there.
-- Seek sellers who are motivated to move.
These days it’s still very rare for owners to face foreclosure -- yet it’s possible to find some who are highly motivated to move.
As a would-be buyer, you may feel uncomfortable about seeking out owners who must sell quickly due to the loss of a job or mortgage payments that are too high for their income. But Michael Crowley, a broker in Spokane, Washington, says you need not feel guilty about doing so.
“You could actually be doing the sellers a favor in such a case. Even if you buy at a discount off the current market value, the owners will likely do better selling to you than they would if the bank took away the house and ruined their credit in the process,” says Crowley, a past president of the National Association of Exclusive Buyer Agents (naeba.org).
How can you identify highly motivated sellers? Obviously, your agent can often find them through the Multiple Listing Service. An additional approach is to walk around the neighborhood on a weekend, striking up informal conversations with residents there.
“On a Saturday or Sunday, you will likely encounter residents who are out walking their dogs or taking their kids to the park. If you’re friendly and express your admiration for their area, they’ll likely chat openly with you and tell you neighbors they know who intend to move soon and the reasons why,” Crowley says.
-- Evaluate property values in the area where you wish to live.
Once you’ve chosen a neighborhood where property values are solid and you’ve found your dream home there, you’ll want to carefully assess its true current value before formulating a bid.
“With warnings about recession in the near term, it’s vitally important you obtain a true ‘opinion of value’ to ensure your bid is at the right level,” Crowley says.
To help develop a realistic estimate of the worth of the home you wish to buy, ask your agent to provide you with statistics on properties that have sold in recent weeks. Make sure this analysis takes into account any likely “distress sales” that have occurred lately, which often come at a sacrificial price for the sellers.
“Even if we face an economic downturn, it’s unlikely that prices will plummet in the coming years. Still, it’s a very good idea to resist overpaying, even if you love the house you’ve found,” Crowley says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)