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, 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? Several factors are making it difficult for these buyers to purchase a home in today’s market. Things like tight credit, limited inventory, higher home prices, and higher mortgage interest rates are hindering first-time buyers. 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. Home prices have been increasing over the past few years, and mortgage interest rates are expected to increase in the year ahead. 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’s easy for first-time buyers to feel confused and hesitant about buying a home. However, here are a few tips that our Association suggests first-time buyers take into account:
Review your finances. Before beginning the home search process, determine what you 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. And first-time buyers should not forget other costs such as taxes, insurance and utilities when calculating a budget.
Determine your wish list. Once preapproved for a loan, consider what you need and want in a home. Whether it’s a certain number of bedrooms, a large kitchen, or to be close to schools or public transportation, it’’ good to have an idea of what you’re looking for in a home and community. Our Web site, www.gcar.net, is an excellent resource for buyers seeking accurate, up-to-date listings in the Greater Chattanooga area. Visiting open houses is also another good way to get a sense of what’s available in your market and what your budget can afford.
Work with a Realtor. All real estate is local, so it’s important to work with a Realtor who’s 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.
The Greater Chattanooga Association of Realtors, a regional organization with more than 1,400 members, is one of more than 1,800 local boards and associations of Realtors nationwide that comprise the National Association of Realtors. The Greater Chattanooga Association of Realtors services Hamilton and Sequatchie counties in southeast Tennessee and Catoosa, Dade and Walker counties in northwest Georgia. For more information, visit www.gcar.net