The United States was supposed to be heading toward a buyer’s market for real estate in 2019. But many would-be homeowners are still confronting sticker shock, especially in popular metro areas.
“Only in deep suburban and rural areas are prices starting to drop, particularly in towns where factories are closing,” says Fred Meyer, a longtime Massachusetts-based real estate appraiser and broker.
Given the overall strength of the American economy and the continuing shortage of residential construction, home price gains continue to outpace wage increases in a number of coveted communities, according to Todd Teta, a senior official at Attom Data Solutions, a California-based firm that tracks housing markets throughout the country.
“Despite falling mortgage rates and rising wages, the cost of owning the typical home remains out of reach or a significant financial stretch for the nation’s average wage earners,” according to Teta.
An analysis of housing affordability by Attom (attomdata.com) found that median home prices are not affordable for average wage earners in 353 of the 480 counties analyzed in its report. Even so, a minority of counties posted better affordability than a year ago.
Meyer urges wannabe purchasers to avoid despair about their odds of attaining homeownership, even if their target area is a pricey one. Rather than backing away, he recommends they take a strategic approach to finding a fair deal.
“Consider lowering your expectations in terms of home size and features,” Meyer says.
For example, you might consider a property with smaller bathrooms and a more diminutive kitchen than your ideal vision. Or you might accept a home without a garage.
Here are a few other pointers for income-tight buyers:
-- Focus on overpriced houses.
Merrill Ottwein, an Illinois-based broker with a long track record working with novice buyers, says some first-timers overlook an important reality in real estate. This is that buyers sometimes get the best deals on property that was priced too high in the beginning.
The trick is to be sure you’re among the first to know when the owners of a favorite property in your neighborhood of choice decide to take a significant price cut. Ottwein says buyers should tell their real estate agent to alert them immediately when this happens.
“That way you can swoop in before others do to try to negotiate a favorable deal, when the sellers are most willing to bargain,” Ottwein says.
-- Consider a dated-looking place.
The cash-flow-conscious buyer may want to consider a category of properties a notch above the fixer-upper. These are essentially well-kept houses; the electricity, plumbing and other systems work. But their owners, though conscientious in some respects, have neglected the interior decor. Hence, they may be forced to sell at a price that’s well below market value.
But Ottwein cautions against mistaking an out-of-fashion house for one with serious underlying issues -- what might better be termed a true fixer-upper.
He recommends a thorough inspection to determine whether a home has fundamental flaws, such as a failing air conditioning system or a bad roof. These are far more costly to fix than is an uninspiring decor.
-- Search for sellers who are highly motivated to deal with you.
In real estate, as in many transactions, time is money. Sellers who must move quickly, perhaps due to a marital breakup, job relocation or financial reversal, are obviously more likely to let their property go for a bargain price.
You needn’t pry or do anything sneaky to find out more about the motivations of owners of homes you are interested in. Often, sellers telegraph their intentions through online or print ads placed by their listing agent. Perhaps their ads will read: “Seller Motivated” or “Must Move Quickly.”
If the ads don’t reveal the sellers’ motivation, a few casual inquiries placed by your real estate agent to the listing agent could do so.
“It’s amazing how often listing agents will reveal the real motivations of their clients, even when it’s against their clients’ interest to do so,” Ottwein says.
Once you grasp the sellers’ motivation and their timing, you can customize your contract offer in keeping with their specific needs. As Ottwein notes, flexible buyers -- who’ve also been fully preapproved for a mortgage and have the necessary documentation in order -- are the most likely to command the sellers’ attention.
“The obvious truth is that highly motivated sellers are much more open to both offers and counteroffers. Often, it’s just a simple matter of timing,” he says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)