How to Buy a First Home in a Competitive Housing Market
The Challenge of Buying a Home in Today’s Market
Many people are finding it increasingly difficult to purchase a home this year. The cost of signing a mutual mortgage has skyrocketed, making it unaffordable for many potential buyers. Additionally, the housing market has been experiencing a severe shortage of available homes for months now.
According to the National Association of Realtors, there were only 3.1 months of home availability nationwide at the end of June. Typically, it takes around six months of housing supply to meet buyer demand adequately. Thus, the limited housing stock further exacerbates the challenges faced by home buyers.
First-time home buyers commonly search for starter homes, which are smaller properties that may require some updating. These homes tend to be more affordable than forever homes and involve less ongoing work and maintenance. However, finding an available starter home is becoming increasingly challenging in the current market.
Competing with Big-Money Investors
An additional roadblock for many first-time home buyers is the competition from investors in the housing market. While buyers rely on mortgage lenders for financing, investors often have the advantage of paying cash for starter homes. As a result, everyday buyers often find themselves in a tough position.
A recent tweet by Redfin highlighted that 37% of starter homes in the US were purchased for cash in May, an increase from the previous year. Real estate investors are actively buying a significant portion of the affordable homes available, further limiting the options for first-time buyers.
Investors are drawn to starter homes as they present lucrative opportunities for making money. These investors can flip homes in need of updates and make a short-term profit. Alternatively, they can turn properties that are already in decent shape into rentals, generating a steady stream of ongoing income.
The appeal of starter homes for investors lies in their easier flipping process compared to larger homes. Additionally, these properties are more desirable for renting due to their lower rental price. A first home may command a monthly rent of $1,000 in a particular neighborhood, while a larger house could cost $2,000. Investors target starter homes to attract tenants who prefer more affordable rental options.
Tips for Buying a First Home in Today’s Market
While buying a first home in today’s competitive housing market may seem daunting, it is not impossible. By following a few strategies, the chances of success can be increased:
- Find a real estate agent known for their speed and negotiation skills, as they can help you identify and make offers on starter homes before the competition intensifies.
- Make a list of your must-haves for a home but try to keep it concise. Having fewer requirements will broaden your options and increase the likelihood of finding a suitable home.
- Be open to considering homes that require repairs. While you may prefer a move-in-ready home, investor competition may be lower for properties requiring extensive upgrades. If you are handy and willing to invest time in updates, you could find a suitable starter home that meets your needs.
- Consider alternative financing options, such as government-backed loans or programs that provide assistance to first-time home buyers.
- Stay informed about market trends and be prepared to act quickly when a suitable home becomes available.
Conclusion
Buying a first home in a competitive housing market presents various challenges, particularly with the limited supply of starter homes and the competition from investors. However, by following the tips mentioned above and staying informed about market trends, prospective buyers can increase their chances of finding and successfully purchasing a first home. While it may require flexibility and patience, navigating the housing market is possible with the right strategy and assistance from a knowledgeable real estate agent.
It is important for individuals to explore all available options and consider alternative financing methods to make homeownership more accessible. Additionally, being open to homes that require repairs may broaden the range of available properties and reduce competition.
Despite the difficulties faced amid a competitive housing market, with determination and perseverance, buyers can secure their dream homes and become homeowners.
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Summary:
Many people are struggling to buy a home in the current housing market due to skyrocketing costs and a shortage of available properties. First-time home buyers are particularly affected as they often compete with investors who have the advantage of paying cash. Investors target starter homes, which are more affordable and easier to flip or rent. This situation has made it challenging for ordinary buyers to find an available starter home.
To navigate this competitive market successfully, buyers should consider finding a real estate agent known for their speed and negotiation skills. Making a concise list of must-haves can also broaden options. Buyers should be open to homes that require repairs, as this can reduce competition from investors. Exploring alternative financing options and staying informed about market trends are additional strategies that can increase the chances of finding and purchasing a first home.
While the housing market may present significant obstacles, buyers can overcome them with the right strategies and assistance. By remaining determined and exploring all available options, individuals can achieve their dream of homeownership.
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Many people are having a hard time buying a home this year. Not only has it become very expensive to sign a mutualbut for months the housing market has been severely short of stocks.
In fact, there were only 3.1 months of home availability nationwide at the end of June, according to the National Association of Realtors. It can usually take up to six months of supply for there to be enough homes available to fully meet buyer demand.
Meanwhile, it’s common for first-time home buyers to look starting houses – Properties that are smaller and sometimes need updating. Starter homes tend to be more affordable than forever homes. And because of their size, they often involve less ongoing work and maintenance (although sometimes there can be a fair amount of work initially to put a starting home in better shape). But today, you might be struggling to find an initial home for one big reason.
When you compete with big-money investors
Many home buyers have to turn to mortgage lenders for financing so they can buy a home. But many first-time buyers today compete with investors for a limited supply of starter homes. And given that many investors have the resources to snag those homes by paying cash, it’s pretty clear that everyday buyers are in for a tough spot.
A recent Tweet by Redfin it pointed out that 37% of initial homes in the US were purchased for cash in May, up from 35% a year earlier. Redfin went on to say, “Real estate investors are buying up a sizable portion of today’s affordable homes.”
Why do investors want to own starter homes? Is simple. They want to make money from them. And they can do it in a couple of ways.
For homes in need of updates, investors can flip the house and make a short-term profit. For initial properties that are already in decent shape, investors can turn them into rentals and secure a steady stream of ongoing income.
So why should investors focus on prime time homes? The reason is that they are typically easier to flip than larger homes and are also easier to rent.
In a given neighborhood, a first home may be able to command a monthly rent of $1,000. A larger house could cost $2,000. But people who can afford a higher rent may be more likely to be able to buy their own home. So investors tend to target starter homes because they’re more likely to enjoy a steady stream of paying tenants.
How to buy a first home in today’s market
It may be more difficult to buy a first home in today’s housing market, but that doesn’t mean it can’t be done. First, find a real estate agent who has a reputation for moving quickly and being an expert negotiator. That way, you may be more likely to find starter homes when they first come on the market so you can get an offer before the competition ramps up.
Next, make a list of your home’s must-haves, but try to be judicious. Having fewer requirements could increase your chances of finding a home that you think is a good fit.
Also, be open to repairs. You may prefer an initial home that needs less work. But in some cases, extensive upgrades can put investors off because they commonly want to see quick profits. If you’re handy and can handle a series of updates over time, you may end up finding a starter property to call home.
Having to compete with investors for a limited supply of starting homes is aggravating. But with the right strategy, you can increase your chances of success.
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