ACAR Says First-Time Buyers Face Obstacles on Path to Homeownership
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 buyers, are struggling to enter the market and don’t always find the home buying process easy.
According to the National Association of Realtors® (NAR), 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. This group of buyers should normally be closer to 40 percent of the market.
Why is the number of first-time buyers so low? The Akron Cleveland Association of Realtors® (ACAR) says several factors are making it difficult for these buyers to purchase a home in today’s market. “Things like tight credit, limited inventory, and higher mortgage interest rates are hindering first-time buyers,” said ACAR President Seth Task. “Traditionally, first-time buyers are instrumental in housing recoveries because they help existing homeowners sell and make a trade up to a larger home. Therefore, it’s important to make sure first-time buyers who are willing and able to purchase a home have the opportunity to do so.”
Recently, housing inventory has trended down and is now tight in many areas of the country. There are also widespread shortages of homes in the lower price ranges in much of the country, and mortgage interest rates are expected to increase in the year ahead. In addition, Task says today’s tight credit restrictions are preventing some qualified first-time buyers, who typically make smaller down payments, from becoming homeowners.
Student debt has also been cited as an obstacle to owning a home for first-time buyers. 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 made it tough to save money.
With all of these obstacles, it is easy for first-time buyers to feel confused and hesitant about buying a home. However, here are a few tips ACAR suggests first-time buyers take into account:
- Review your finances. Before beginning the home search process, buyers should determine what they can afford. Carefully evaluate your income, savings and credit report. Also collect documentation of income and cash available to prepare for the mortgage application process. A lender can evaluate your finances to qualify and approve you for a loan amount. Task reminds first-time buyers to not forget other costs such as taxes, insurance and utilities when calculating a budget.
- Determine your wish list. Once preapproved for a loan, buyers should consider what they 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. Task recommends realtor.com® as a resource for buyers who want to find accurate, up-to-date listings in their area. Visiting open houses is also another good way for buyers to get a sense of what is currently available in their market and what their budget can afford.
- Work with a Realtor®. Finally, ACAR reminds first-time buyers all real estate is local, making it important to work with a Realtor® who is familiar with your desired community. A Realtor® can provide valuable counsel, discuss listings, show you homes in person, negotiate on your behalf, and help you stay focused on the emotional and financial issues that are most important.
Despite these obstacles, Task noted that Realtors® in the Cleveland and Akron area markets are optimistic that first-time homebuyers will be able to achieve the American dream of homeownership. “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 due to the recent increase in home values.”