3 Tips for First-Time Home Buyers
To successfully navigate the market, first-time buyers should expect to move quickly and make an offer if they see a home they like. They should also seek mortgage preapproval.
NEW YORK – Real estate has garnered considerable attention since 2020, and for good reason.
Though speculators and real estate professionals may point to several variables that have affected the home market in recent years, the pandemic certainly was among those factors. Real estate prices and mortgage interest rates increased significantly during the pandemic and have remained well above pre-pandemic levels.
The spike in home prices and interest rates has significantly impacted young home buyers, some of whom feel their dream of home ownership may never be realized. Data from the National Association of Realtors® indicates that home buyers' median age is significantly higher than two decades ago. In 2023, the median age of buyers was 49, which marked an increase of 10 years compared to the average buyer age 20 years ago.
First-time home buyers may face a more challenging real estate market than they would have encountered just a half-decade ago. The following three tips can help such buyers successfully navigate the market as they look to purchase their first home.
1. Expect to move quickly
Inventory remains very low, so buyers are in heated competition for the few homes on the market. In late 2023, NAR data indicated the rate of home sales was the lowest it had been in 13 years, so buyers will likely need to move quickly and make an offer if they see a home they like. Chances are the property won't be on the market too long before it's sold. The NAR noted that homes spent an average of 23 days on the market in October 2023.
2. Apply for mortgage preapproval
The market's competitive nature for buyers means it's in their best interests to arrange financing before beginning their home search. A mortgage preapproval can be a competitive advantage, as it indicates to sellers that buyers won't be denied a mortgage or lack financing after making an offer. The financial experts at NerdWallet note that buyers will be asked to provide details about their employment, income, debt, and financial accounts when applying for mortgage preapproval. Gather this information and clear up any issues, such as credit disputes or delinquent accounts, before applying for preapproval.
3. Set a realistic budget and expect to offer over the asking price
A financial planner and/or real estate professional can help first-time buyers determine how much they should spend on a home. In the current market, buyers should know that they will likely need to pay more than the asking price for a home. For example, NAR reports that 28% of homes sold for above list price in October 2023. With that in mind, first-time buyers may do well to look for homes that are under budget in anticipation of offering more than the list price after seeing a property.
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