Just last month, a meteorologist of 32 was excited by his promotion to a better-paying position with the National Weather Service. At long last, he figured he could afford to buy a modest single-family house in a middle-income suburb near his office.
But so far, his housing search has proved fruitless. Though his earnings have risen, so have home prices in his favorite suburb.
This true story doesn’t come as a surprise to Danielle Hale, managing director for research at the National Association of Realtors (realtor.org). As she notes about the affordability problem now facing countless buyers: “Price growth is outpacing income growth.”
But Hale expects wannabe buyers like the meteorologist to continue scouring the market despite the ongoing shortage of inventory.
“Buyers are very resilient,” she says.
What keeps so many would-be buyers in markets still largely dominated by sellers? Tom Early, a long-time real estate broker, says some are motivated by fear that mortgage rates, which continue to hover near historic lows, could rise due to economic changes.
Still, some prospective homeowners are willing to wait on the sidelines in hopes they could gain more leverage in the next few years. Their hopes are bolstered by predictions from such housing analysts as Svenja Gudell.
“As the number of homes for sale increases and home appreciation slows, we expect the market to meaningfully swing in favor of buyers within the next two to three years,” says Gudell, chief economist for Zillow, which tracks housing markets throughout the country.
But, as Early says, “Most people don’t want to put their lives on hold with the expectation that they might could get a better price if they wait.”
Here are a few pointers for those pondering a first-home purchase:
-- Search for eager sellers.
The loss of a job is one common reason homeowners must sell; divorce is another. Also, an increasing number of baby boomers -- now in their 50s to 70s -- would like to sell and downsize as they head into retirement.
As a potential first-time buyer, you might feel awkward seeking out owners who are under pressure to sell. But there’s nothing unethical about doing this, Early says.
“Owners whose houses have long been languishing on the market, usually due to overpricing, might be extremely ready to negotiate,” he says.
How can you identify those who are highly motivated to sell? Early suggests you ask your real estate agent to draw up a list of properties in your favored area that have been on the market for an extended period. Also, he recommends you go to the neighborhood where you’d like to buy and talk informally to residents.
“Tell the local residents how much you appreciate their neighborhood and they’ll be more likely to open up with you as to which houses could soon hit the Multiple Listing Service,” Early says.
-- Spend time researching any neighborhood you’re considering.
One way to help you search for motivated sellers is to crunch numbers. Ask your real estate agent to determine the average “days on market,” (from list to sale), for properties in the area you’ve chosen. Then look for homes in that price range that have been sitting unsold for a longer-than-average period.
Before crafting an offer on the home of your choice, Early suggests you also examine another set of numbers: the average list-to-sale price differential. If you note that most properties have recently fetched 90 percent of their list price, you might consider a first bid 10 percent lower than asking, assuming your research shows this is warranted, he says.
-- Avoid harsh critiques of a property you’re considering.
Suppose you’re seriously considering a house that would easily accommodate you. However, you’ve noticed a few minor shortcomings in the floor plan, such as an inconveniently located laundry room and the absence of a powder room for guests on the first floor.
In an attempt to strengthen your bargaining position, should you write a letter highlighting these drawbacks and also pointing out the owners’ poor taste in choosing to paint their kitchen dark blue? Absolutely not, Davis says.
“It’s almost universally true that homeowners have pride in their properties and are hurt by a strong critique,” Davis says.
Of course, you and your home inspector should be forthright in itemizing repairs that need to be taken to bring the property up to standard, such as roof repairs or the replacement of a nonfunctional water heater. But the inspector should do so in a courteous manner that doesn’t insult the owners.
“It’s always better to be assertive without being obnoxious,” Davis says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)