First-time Buyer Homes Out of Reach in 2022 Housing Market

A first-time buyer finds homes are out of reach. She is looking for a home, but as a first-time buyer, she hasn’t been able to get an offer accepted. Why?

Q: My mom gave me a copy of Ilyce’s book 100 Questions Every First-Time Home Buyer Should Ask for Christmas, back in 2019. My husband and I have been looking for our first home for about 5 years now.

I’ve been to almost every open house and have actually seen houses come back on the market in this time. We have put offers in, but feel consumed by the constantly inflating market and can never accrue enough cash while renting (Boston area, so it’s expensive) to feel secure.

Advice for First-time Home Buyers in 2022

Is there any advice you could give us about the current market? We have agreed that we:

  • Don’t want to overpay
  • Buy above an assessed value
  • Get emotionally involved in bidding wars (like we have in the past).

Our pre-approval expires again soon. Should we wait or make an offer?

First-time Buyer Spent 5 Years of Looking at Homes

A: Five years of looking! Wow. We wonder what you’re waiting for. Five years ago, prices in the Boston area were far below where they are now, and interest rates were lower. Your dollar would have had far greater buying power than it does today.

Most of the country is experiencing soaring home values, and we get it. Combined with rising interest rates (as of this writing, interest rates for a 30-year fixed-rate mortgage are up more than one percent from a year ago), it’s scary. It might well feel as though every week your dollar buys less.

First-time Buyer Waiting for “Something Better”

We suspect the answer to why you’ve been sitting on the fence for five years, though, is more psychological. It’s hard to commit to buying a home if you believe something better is just around the corner:

  • Better house
  • Better lot or yard
  • Better finishes
  • Better amenities
  • Better neighborhood
  • Better schools

“Something better” is a mindset that befuddles many first-time buyers.

First-time Buyer Worries – And May Have Regrets

If it isn’t waiting for “something better,” you might be worrying about whether you’re overpaying, no matter what price you wind up paying. That can stymie your home shopping efforts and create a lose-lose scenario where you regret winning the bid (because you’re worried you overpaid) and you regret losing the house (because you’ve missed out on another opportunity to be a homeowner).

First-time Buyer Home Prices Skyrocket

By the way, we understand what it’s like to feel as though prices are escalating beyond reach. According to Redfin, home prices reached new highs in the four week period ending March 20, as fewer homeowners listed their homes for sale. The study found median home sale prices rose 17 percent year-over-year, the number of active listings on the market fell to an all-time low, and half of homes sold for above list price.

First-time buyers everywhere are feeling the pinch with more pain to come. In the 2022 National Association of Realtors Home Buyer and Seller Generational Trends report, first-time buyers made up 34 percent of all home buyers. In February, 2022, first-time buyers accounted for 29 percent of home sales, near 2014 levels, according to the Realtors Confidence Index. With interest rates rising along with home prices, it’s going to be even tougher for first-time buyers to afford a home.

When First-time Buyers Should Purchase a Home

Which brings us back to what you should be doing. In general, we think the best time to buy a home is when you can afford to live in your neighborhood(s) of choice, even if you buy a smaller home on a smaller lot. Can you afford to buy something, somewhere? Surely in five years your income has risen, even if it hasn’t kept pace with home value increases.

We’ve long said that if you’re really ready to buy, today is the right time. If you can buy something you’ll be happy with, then you should buy. Don’t fool yourself into thinking that if you aren’t buying your “forever” home, it isn’t worth getting in the game. It is. But you may have to settle for a smaller home with fewer amenities right now. On the other hand, you’ll be building equity with each payment and hopefully will find a place you can stay for at least five to seven years.

Most first-time buyers who get stuck eventually get up the nerve to make a winning offer after they’ve missed out on a few homes. That hasn’t happened to you, but don’t let fear rule the day. If you pay $24,000 per year to rent, that’s money that could be spent on a mortgage – with a portion of each payment going to pay down your loan balance.

First-time Buyer Homes Out of Reach Because Prices are Rising Quickly

Consider this: Unless you’re living with your parents, the cost of renting is also skyrocketing. Redfin notes that asking rents increased an average of 15 percent year-over-year, rising some 40 percent in Austin, Texas.

So unless you plan to move from a high cost neighborhood to a lower cost one, consider buying, especially if the cost of ownership is less than what you pay in rent. Do the math, take a deep breath, and call your agent.

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