Friday, February 27, 2015

As Prices Continue their Upward March, Buyers may be Left Behind

I have been harping on the idea of buyers sitting on the fence till they no longer qualify for several years now. And over the last 18 months I have watched as the required qualifications to buy an entry level home have crept up higher and higher. In 2011, I had no problems getting a pair of minimum wage earners into an entry level house. Now this is an unlikely scenario. Houses that were solid first time home buyer residences were selling at prices between $115,000 and $140,000. Now those very same houses are pushing through the $200k barrier.

Wages are rising at best 3% annually, but housing is well above 7%. How long before a buyer watches their dream home become unattainable? Three months? Six? A year? Too many entry level buyers lose opportunity by being too picky about their first house. I certainly understand that buying a house is a BIG deal. People are generally spending the largest sum of money they ever have spent when they buy a house. Having some pushy agent leaning on them is no comfort. But the reality is that the first house is almost always just that, the first house. Once a buyer has their first home they now enjoy the benefits of owning versus renting. They enjoy that appreciation working for them instead of against them, the reduction of principle through monthly payments, equity, control, and often there are tax advantages as well.

Waiting for the ideal house may work out for a buyer, but the odds favor sellers in a recovering market. Buyers should be cautious that the house they are buying is in solid condition, safe, etc. but they also should be mindful that perfection rarely rears its beautiful head and compromise today will likely reward fantastic dividends later.

Most first time home buyers end up making a compromise between what they had hoped for and ultimately what they were able to find and afford. The longer a buyer waits for the "ideal" property, the bigger that inevitable compromise will be. Sadly, for many the compromise will end up being no home purchase at all and back to the landlord they shall go.

I have lost clients that did not like to hear that side of the real estate reality and so they find another broker that sings a different tune. In the end, they almost always end up with the compromise I told them they would face or they scurry back to a rental property. Far more often however, my clients heed the call of the mark and end up gloriously better off later. The house at the top of this article was a "compromise" back in 2011. My client needed a fair amount of space for his two kids but a detached home was out of reach. Three years later the market delivered his salvation. He paid $118,000 for that townhouse and sold it last summer for $152,000. Now he has the detached house he always wanted in a neighborhood that was out of reach before. Patience and a small compromise today can often bring amazing rewards a short distance down the road of life.

From 2010 through the early part of 2012 buyers could be picky and they could kick sellers in the teeth. But that was then and this is now. Sellers run the show and buyers need to work the market very hard. Buyer's agents have their hands full trying find homes for their clients.

For home owners thinking about selling, this could be a golden moment with bold rays of sunshine beaming down from the heavens and angels shall sing... Many sellers have found that their previously upside-down home is now in the clear and there are buyers lining up to make offers.

Real estate has always been an opportunistic endeavor. For buyers it is about beating the closing window of opportunity and for sellers it is about getting in while the buyers are frothing at the mouth for inventory. Is that a golden ray of sunlight I see? Hark! can you hear a hymn of fortuity singing down from the heavens?

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