The Plight Of The First Time Home Buyer
I’m reading about this dilemma everywhere. The plight of the first-time home buyer. People like me that are finally able to perhaps own a small home, but are outbid by people with lots of cash.
On Saturday I bid on a condo in that complex I’ve always loved. One-story bungalows in a perfect location. The ones I’ve coveted for years. I bid over the asking price, but my bid was not accepted.
Two of these same condos sold the week before for $10,000 less than the price of the one I bid on. But I wasn’t pre-approved for a loan at that time.
What Seems To Be Happening:
Most likely someone came in with a cash offer. That’s what’s happening now. Buyers are walking in with many thousands of dollars over the asking price to sweeten the deal.
Google reported in April that the search “When is the housing market going to crash?” had spiked 2,450% in the past month.
“Why is the market so hot?” searches had doubled in just a week.
And, in the most telling indication that the market may be in a bubble, “How much over asking price should I offer on a home 2021” jumped 350% in that same week.
What I’m Looking For In A Home:
I’m not looking for anything fancy. Just a little bungalow under 1000 square feet with a small yard. But those homes are being snapped up almost immediately or even before they are listed.
It is very much a seller’s dream market.
I read a thread on Twitter about people just like me attempting to become a first-time homeowner and being outbid over and over again. They are disheartened.
How Covid Is Affecting The Housing Market:
The Covid-caused crisis unfolded in the opposite direction of what was expected. Buyers are bidding up home prices and causing homes to sell quickly in competitive housing market conditions.
Currently, there is an extremely tight supply of homes on the market, the lowest on record since the turn of the century. Home price growth continues to surge in double-digits due to tight supply and lower interest rates or borrowing costs.
Increase In People Working From Home:
Low mortgage rates and an increase in working from home ignited by the pandemic have fueled a rapid increase in housing demand. More existing homes were sold in 2020 than in any year since 2006.
Every day I also look online at rental homes to lease. The cost of rentals also increased dramatically. That was why I turned to the option of purchasing a home in the first place.
So in terms of buying a home, I guess I’ll just keep looking. Hoping I can happen upon something within hours of it going on the market in order to have a fighting chance of buying it.
We went through something similar a few years ago… we got out bid on 2 different homes. Since that happened I’ve learned of a clause you can put in your offer to be given a chance to out bid the highest offer they receive. That way you get a chance to bid a bit over if you so choose. I have no idea what it’s called but it would put you in the drivers seat a bit. Just a suggestion we learned about after it was too late to help us but it might help you.
My friend recently became a widow. Her husband had told her to sell the house and move closer to her mom (who is over 90 and in a care home). She put her 35 year old, rancher with full basement on the market for $749,000.00. She had over 100 showings over two days. All bids were to be in by 7 pm on the 3rd day. She accepted the $one million five hundred thousand ($1,500,000.00) bid. Of course Has to pay commission on that sale. She then went on to buy an apartment 50 miles away from her current residence to be closer to her mother. 800 square feet for $890,000.00. Times are crazy and unfortunately many new home owners will get burned when mortgage interest rates rise (presently at 1.7%) and value of home goes down.
Don’t get frustrated and don’t give up. The right place will come along. With Kendra helping you it’ll be just fine. I’m a firm believer that things happen when they’re meant to happen. Look how far you’ve already come – you’re approved to purchase a home! That’s huge, Brenda!
I moved back to Missouri from Texas about 1-1/2 years ago. I first purchased a building in a small town with shop space below and an apartment above. But between the pandemic and realizing I just didn’t like being in a shop all day long, after a little over a year I decided to sell and purchase a home closer into St Louis. I had seen condos at good pricing about the time I decided to sell the shop. But two months later when the shop building sold I was in the same dilemma as you are. However I did have cash, but that didn’t seem to matter. I finally got the third house I bid on, it was smaller and less updated than others I had looked at but when all was said and done, it’s good for me. I only paid $1,500 over asking so I feel fortunate there. I looked at Zillow daily and worked to get my agent to take me immediately but there were houses and condos I missed out on because we couldn’t get there fast enough. You’ll find one, it just takes patience. Good luck.
I live just outside of Boston. My neighbors put their 1600 sq foot 3 bed house, which is on 0.15 acre of land, on the market two weeks ago for $925K. Within 4 days they had 21 offers, all but one offer was for over $1M. They had two offers for $1.3 Million and one was an all cash offer, which is the one they accepted. They bought the house 7 years ago for $650K. I guess this puts me in a very good place financially – having lived in my house, which is slightly bigger and on a larger piece of land, for a decade, however it is all rather unbelievable!
That said, when I was searching for my house, I almost gave up, because even back then in my area houses were going for oodles over asking. But, I came across a for-sale-by -owner house that was perfect for me and the sellers must have liked me because they accepted my offer. I am hoping something similar happens for you!
Brenda, just hang in there as you are doing and be glad that you can’t compete with these astronomical offers because you really shouldn’t. When the market adjusts you could find yourself in a place where your property isn’t worth what you owe on it, you’d lose money if you had to sell it, and a lot of people will be in that kind of mess. I was in real estate back in the 80s, a rough time for sure, and lots of times what people could qualify for was far from what they wanted. Your apartment is just perfect for you for now so don’t lose faith, just watch and wait for the right house at the right price to come along. I play what if I didn’t have horses sometimes and look for houses and there’s no way I would pay what they’re going for in Broken Arrow, my home town or anywhere else for that matter. My little mini ranch is a hard thing to come by around here so I’ll just sit tight and think of it as my ace in the hole. And so we wait.
It is crazy in the housing market right now. You might be better off to wait until the crazy ends.
Brenda, I know this is a very difficult time for you, and frustrating. I also know you will find a perfect place, it will be there for you. In southern Ontario, (Canada) our prices have risen astronomically. Average house price in Toronto is a million dollars and these are not mansions. We are an hour west of there, and our available homes are going $200,000. Over asking. Multiple bids, and many discouraged and disheartened shoppers. I also know physical manifestation of stress is very real. I look forward to seeing good news in your blog, that you have found a great home. Good things take time, and we are all supporting you in your search.
It’s a very crazy housing market everywhere. We looked at a new tract of homes being sold near us. The prices were extremely high (okay it’s So. CA). The salesman said they release 2 homes a week and people bid on them. What?! These are new homes and they are having people bid?! He said they sale for 30 to 50K above asking. He added that so many people are working from home they can leave the Los Angeles area market. These prices are reasonable compared to L A. My thought is it will all end and prices will drop again. Since interest is low, people might not lose their homes like 2008 but prices will drop. I’d suggest to keep looking in your targeted area.
Same here. Houses are going for $30,000-$50,000 above asking price. I can’t compete with that.
It definitely is a seller’s market right now. I agree with a couple of people who explained about writing a letter to the seller, too. Great idea. Also, if you’re not already doing so, I’d highly recommend working with an agent. They’ll do all the work for you and know about something on the market before you do.
My oldest daughter is my real estate agent.
Hopefully that will be a plus with your daughter as your agent. She may be able to find houses before they hit the market.
I know this is frustrating for you. It is difficult for me not react to the media frenzy that is adding to this housing craziness and I own a home. Websites like Zillow do not help; my husband and I received an email that our home sales price is at least $100K over what it was last month. Puhleeeease!!! This is not reality. Our county home evaluation went down this year by over $50K. That is reality. When people pay the over valuation for homes, it eventually rises taxes for the homeowners – some who are unable to stay in their homes because of their tax increase. Who really benefits the most in this? You really do great research and I think you know the answer to this.
One thing that I would suggest when making an offer is to write a letter stating how much it would mean to you to live in the house. In seller’s market in 1997, we had 21 showings and 7 offers (all but one over asking price) the first day. We sold to the couple that wrote a letter stating how they walked their dog past our house regularly and always wished they lived there. Who could say no to that?
My hope for you is that you are able to find calm in this housing storm and be positive that you will find the perfect home for you and your sweet critters at the perfect price for you to afford. Best wishes to you Brenda! Marla
I’ll just hang on and see what happens.
Many of the recently published articles on what is causing the crazy real estate bubble are not talking about buyers in the form of partnerships and corporations coming in with big money to suck up as much real estate as they can, and then they let the properties run down as they lease them out for outrageous rents to tenants. This became a major issue in many areas during the Great Recession, and now they are in Milwaukee County where I live, where we didn’t have that issue before. You may have to just wait until the bubble bursts – which it will – we just don’t know when. In the meantime, continue to look, and plan, and save as much money as you can to reduce the amount of mortgage you will need to take out.
Am doing all you mentioned.
Stick with it. I bought in a seller’s market as well. I checked listings 3x a day. The condo I purchased was in a wealthy area….way out of my range…but it was exactly what I wanted and I was willing to eat ramen noodles forever if I needed to pay for it 🙂 It went on the market 3x in 5 years… once the prior owner just moved for family, once the owner moved into a facility, and once the elderly woman passed before moving in. I bid on it 2x and also went above list as you mentioned but was outbid both times.I had the same budget as you noted. The 3x time it was listed I put in a bid $50 above whatever the highest bid was given (up to my own tippy top number…and phrased it that way) along with a heartfelt letter of why I wanted that particular condo. I explained some things I’ve been through, all the previous times I bid, and why I truly felt it was my home. At 41 it was my first purchased home and simply love it. The seller at closing noted they gave to me because of the letter and my creative thinking. Keep at it and you’ll get what you are looking for.
My daughter said it’s against the law to give out info about the bids, so I never know what I’m competing with.
Doesn’t your daughter have anything you could rent or help you find a house? I thought you said she was a realtor.
Brenda you need to work with an agent. They have access to information that you don’t and can give you information on some houses before they are even listed.
Kendra is my agent.
She is. And she’s at a loss as well.
Out of curiosity, is this the first time you ever tried to buy a home or did you buy one jointly with one of your spouses in the past?
With spouses only.
We had the same problem a number of years ago while trying to buy in Tucson, AZ. Every house we liked and made an appointment to see had just been snapped up by the person before us. I finally found a real estate company that listed their new listings in the evening rather than in the morning. So each evening I checked their listings, found what I wanted and called for a first thing in the morning appointment and got the house. Maybe there is a company in your area doing the same thing. It takes some digging but you might be fortunate. Good luck.
And houses are increasing their prices after being listed constantly.