First-time homebuyers are gaining confidence in their ability to make the correct decisions in a challenging market. However, one major factor still needs to change before many prospective buyers will take the leap: Sellers need to bring home prices down.
In a survey of people who are searching for their first home or purchased one within the past year, Neighbors Bank found that first-time buyers are making informed decisions, negotiating and walking away from deals when necessary, and making concessions to find a home they can afford.
When it comes to strategies to woo these buyers, 40% of survey respondents said a price reduction is the seller concession that would most boost their confidence to move forward with a purchase.
In September, the national median list price for the United States was $419,250, according to Realtor.com® data. This price was down 1.4% from last September, marking an 11th consecutive month of year-over-year declines.
While listing prices are slowly coming down, buyers are still looking to sellers to sweeten the pot.
Neighbors Bank found that 86% of first-time buyers feel comfortable making an offer below a home’s asking price, and 57% have walked away from a home because they felt they had the negotiating power to do so. After years of navigating a challenging market, many buyers are gaining the confidence to ask for the deal they want.
Buyers are also realizing that a price cut is not the only way to save in the long term. Many buyers, up to 83%, would accept a mortgage interest rate buydown from a seller or builder. Buyers also expect sellers to make repairs before closing and assist with closing costs to reduce the amount of cash the buyer needs upfront.
Mortgage rates remain a major obstacle, with 70% of respondents saying that current rates make every option feel out of reach. However, Neighbors Bank maintains that there are many more factors to take into consideration beyond the mortgage rates in the headlines. Credit history, loan type, down payment, and available seller concessions all have an impact on what a buyer’s actual mortgage rate will be.
Plus, waiting specifically for mortgage rates to drop comes with some risk. Home prices can rise in the meantime, or the market can be flooded with eager buyers when the rates come down.
More than a quarter of first-time buyers are aware of this risk and say that their biggest concern is waiting to buy only to see prices rise again, according to Neighbors Bank.
Because home prices, mortgage rates, available housing inventory, and other factors are constantly changing, timing the market perfectly is very difficult, according to Bob Curtis, founder and CEO of GetWyz.
“The bottom line: Don’t buy a home because you think rates are about to go up, and don’t postpone buying solely because you think rates are about to come down,” Curtis tells Realtor.com. “Buy when you find the right home and can comfortably afford the total cost of owning it.”
To find the right home at a price they can afford, buyers are expanding their search. Nearly 90% of buyers are open to buying outside a major metro to find an affordable home. Buyers are also looking at different neighborhoods and smaller homes as ways to increase affordability.
Ben Mizes, a real estate agent and investor in St. Louis, says that he’s seeing first-time buyers show more awareness with their money.
“Rather than spending their budgets on the best house and backyard, they are looking farther away at smaller houses. They are doing more research on houses that can be improved with minor changes,” Mizes tells Realtor.com. “Many people are deciding that they can live with a house that doesn’t have all of the ideal features rather than saving to buy a house for another 10 years.”
Once they find their desired home, many buyers are finding success by asking the seller for concessions to get a deal within their price range, Mizes adds.
Although first-time buyers are feeling the weight of their choices, with 69% of respondents telling Neighbors Bank that every homebuying decision feels too risky to get wrong, they are making wise decisions and sacrificing when necessary to find the right home at the right price.
