For people with good jobs and strong credit, today’s real estate market is an attractive one – with low mortgage interest rates and continued affordability. However, some buyers, especially first-time ones, are struggling to enter the market and don’t always find the home buying process easy.
According to the National Association of Realtors, first-time buyers accounted for 26 percent of home purchases in January. This is down from 27 percent in December and 30 percent a year ago, making it the lowest level for first-time buyers since October 2008. Normally, this group is closer to 40 percent.
Traditionally, first-time buyers are instrumental in housing recoveries because they help existing homeowners sell and make a trade up to a larger home. Factors, like tight credit, limited inventory, and higher mortgage interest rates, are making it difficult for these buyers to purchase a home in today’s market. An NAR survey showed that of the first-time buyers who said it was difficult to save for a down payment, 54 percent said student loans were the culprit.
When we look at the eastern half of Cuyahoga County, there are some noticeable trends. Though home values on the east side tend to be slightly lower than the county-wide average, we have seen around 3.2 percent growth in estimated home values across the county, though this could vary with a formal appraisal. It is important to note that the highly ranked school systems on the east side are experiencing a tightening of inventory, which is causing over double-digit appreciation in many areas.
It is easy to feel confused and hesitant about buying a home. However, here are a few tips for first-time buyers take into account:
• Determine what you can afford. Evaluate your income, savings and credit report. With proper documentation, a lender can evaluate your finances to qualify and approve you for a loan amount. Remember to factor in costs such as taxes, insurance and utilities.
• Determine your wish list. Once preapproved for a loan, consider what you need and want in a home. Whether it is a certain number of bedrooms, a large kitchen, or to be close to schools or public transportation, it is good to have an idea of what you are looking for in a home and community.
• Work with a Realtor. All real estate is local, making it important to work with a Realtor who is familiar with your desired community. She or he can provide valuable counsel, discuss listings, show you homes in person, negotiate on your behalf, and help you stay focused on the issues that are most important.
With these tips in mind, Realtors are optimistic that first-time homebuyers will be able to achieve homeownership. Lastly, we expect to see the typical spring inventory increase and are hopeful that more sellers, including those that have been on the fence, will decide to sell as home values increase.
Seth Task is president of Akron Cleveland Association of Realtors.