Glenn is president of Ally Home, with more than 35 years of experience in consumer lending, mortgage and capital markets.
In today’s competitive climate, purchasing a home can be stressful. Whether you’re a first-time homebuyer or you’ve been down this road once or twice before, a complex set of factors exists presently, making homebuying, at times, tricky to navigate.
With prices up and buying power down, many prospective buyers anxiously remain on the sidelines, contemplating entrance into the market. Although the current landscape presents challenges, with the right education and preparation, consumers can become more confident about market conditions and make a home purchase they feel good about.
Leveraging Market Factors
A lack of inventory and high home prices have created a strong sellers’ market, leading homebuyers to feel anxious about what they can afford and the prospect of overpaying. A recent survey (done by my company) of more than 1,000 U.S. adults showed that 45% of first-time buyers are most anxious about deciding on a home price, while another 42% worry about prioritizing what they want versus what they can afford.
The average home price leveled out or even declined by 1%-2% over the past 60 days, making the next three to six months a good time to buy before the spring buying season ramps up. Next year, I believe we can expect to see a continued slight dip or plateau; however, in 2023, my company suspects prices will rise again. With home prices expected to increase in the long-term, it could be appropriate to buy now and begin building equity.
The pandemic disrupted some of the market’s cyclical patterns, but we should begin to see a return to stability. Typically, the majority of the country’s housing markets slow in Q4 and Q1 as people wait to move until they receive their annual bonus or when their kids are out of school for the summer.
First-time homebuyers often have an idealized picture of the perfect house in their mind’s eye. Real estate agents should help new buyers digest market realities. Under normal conditions, when inventories were three times what they are today, house hunting until you found the ideal home was a viable strategy. Today, the fierce level of competition means buyers must strike a balance and strive for compromise. If a house checks off most of the important boxes on the “must-have” list, buyers should consider making an offer before the opportunity passes them by. On the other hand, if it’s critical for a client to have a home office or to be within walking distance from public transportation, they shouldn’t consider a home that doesn’t fit those criteria.
Prior to their search, buyers also need a firm grasp of the true cost of a home. In addition to the house price, consumers should pay attention to the inspection, noting repairs or updates and how they will affect their budget. When buyers come into the search equipped with this knowledge, it can ease their offer stress, ensuring they’re confident in their decision.
Agents In Tune With The Market
Keep in mind that a good agent should have their finger on the pulse of the market and help buyers secure a home that meets their criteria. They should know what’s coming on the market four to eight days in advance, meaning they can give clients advanced notice, so they’re prepared to quickly assess the opportunity and make an offer if they choose.
Preparation is key in easing buyers’ anxieties. A certified pre-approval from your lender of choice is a great way to increase confidence in your offer. I also encourage eligible buyers to pre-lock at today’s rate.
If possible, buyers should also try to put 20% down to avoid Private Mortgage Insurance (PMI). If they have additional funds available, I recommend they still stick with 20% and invest the remaining savings in higher-yield opportunities.
Buy With Confidence
My company’s survey data indicated that more than half of people feel anxious about homebuying. So prospective buyers should take heart that they’re not alone in feeling overwhelmed. Deciding on a price they can afford, determining the time to buy and prioritizing what they want versus what their budget allows are all top concerns. However, when armed with the right support, data and knowledge, buyers can enter the market with confidence.