A millennial REALTOR’s take on buying a home in 2023
The opportunity for first time home buyers to own a home died in 2022… or at least that’s how most people are feeling right? How many of you have been made to tremble and pull your hair out as you hear things like “historically high interest rates”, “turbulent real estate market”, and “the time to buy has gone”. Well I wanted to get out there to find out exactly what people are feeling and provide some insight for those of you who refuse to accept that your next time to buy is a decade away.
To do that, I sent out a poll and heard from 184 of you on exactly how you’re feeling about today’s real estate market. Now this is a blog and not a book, and so I’m going to give you the 30,000ft overview before diving into what this means for my home buying hopeful friends! So, like I said, I got 184 responses from people ranging between 21 and 70 years old. What surprised me was that no one demographic group was more optimistic or pessimistic than another.
When I divided up by generation, gender, income, monthly rent, or etc. I found a nearly even divide between those who felt optimistic and pessimistic! In fact, of all the ways I was able to break down the data, only one group was statistically different from the rest in their outlook and that was parental home ownership. Of the people that responded that they feel pessimistic about the prospect of buying a home in this market, 42% do not have parents that own their own home. Of the people that feel optimistic, 85% have parents who own their own home. And then of the group in the middle (those who feel it is an average time to buy), 90% have parents who own homes.
Now that isn’t necessarily surprising. Everything from our traditions to our favorite foods are impacted by the influence of those around us. And who has more influence than our family? Then you throw in the fact that the people around you are divided on these economic times and you have the perfect recipe for fear and confusion. So if that’s you but the dream is to purchase a home, or even just move in the next year, let’s talk about that!
Concerns of the home buying hopefuls
Let me reiterate, this next section is not written to convince people to buy a home. It’s written for the people who would like to buy but are afraid, confused, or uncertain about how in the world they’ll pull that off. The following figure will show you the biggest concerns the participants of this survey have right now when they think about buying a home. I’ll speak to them.
| Type of concern | Number of people with that concern |
|---|---|
| Interest rates are too high | 65.2% |
| I’m nervous about the current market | 37.5% |
| I can’t afford the down payment | 31.5% |
| The process of buying a home is intimidating | 20.1% |
| I can’t afford the monthly payment | 18.5% |
| I don’t know if I want to live in this area long term | 18.5% |
Interest rates are too high
I know full well that there are a lot of people out there kicking themselves and feeling like they missed their only chance to buy a home. But that’s just not true. For example, some sellers are having to drop the list price of their homes by as much as 20% or more. Some builders are offering thousands towards closing, or have deals with lenders to offer reduced interest rates. In many markets, sellers are much more desperate to work with buyers bringing them offers. This could result in things like seller funded 2/1 buydowns, or 3 year free refinancing on loans, etc. I understand these things may not mean anything to many of you without a full explanation, but the idea I’m getting at is that if you want to buy a home there are ways you can make that happen (and maybe even for a better deal than 9 months ago when buyers had to make insane offers to get the house they wanted). We’re in a window where many sellers are dropping prices in response to higher interest rates, and prices will stabilize and then rise as interest rates flatten for the long term.
So if interest rates are your concern, start asking yourself or your agent questions like, “can I now find a better deal on the type of house I want?”, “can I work with the seller to buy down my interest rate in the near term?”, “are there programs being offered by lenders that could potentially help me rework my loan in the long term?”
I’m nervous about the current market
And you are not alone! Buying or selling a home is never a little deal, and so when you throw in a turbulent market it’s no surprise that many people are nervous. My advice is just to talk with people who know what they’re doing and who you can trust. Most people probably have a friend who they trust that works as a financial advisor or real estate agent. Consider talking with them to figure out what steps you can take to meet your goals. Things are changing quickly, and so talk with someone who can help you to navigate those changes.
I can’t afford the down payment
This was hands down my biggest deterrent from buying my first home. As I said at the beginning of this blog, I had blown my savings on a hobby and thought there was no way to both enjoy a social life and save for a house. But in came good ol’ Uncle Sam! There are various government programs that will allow you to put down as little as 3.5% for a downpayment (or less in other cases, such as for military members). For me that meant putting down just $8500 for my first home. But you don’t need to know all the options out there, you just need to know a good trustworthy loan officer. Don’t know one of those? Find a real estate agent you trust and I’m sure they’ll know a few!
The process of buying a home is intimidating
I was surprised that only 20% of people were concerned about this. Between understanding a personal budget, to navigating offers and contracts, all the way to locking down the terms of a home mortgage - buying a home is no walk in the park. But you may have noticed that I’ve been using a certain word a lot, and that’s “trust”. Behind every fear or concern in this industry is a person trained to understand and advise you in the process. So find one you trust and let them explain things clearly to you. You don’t have to make this sort of decision blindly. Let someone give you confidence and peace of mind so that you can make a decision that’s best for you!
I can’t afford the monthly payment
This is a great reason not to buy a house! However there are ways to get around this if it’s your only hurdle. Could you have roommates? Not only will they be paying off your mortgage, the rent might even be cheap for all involved parties. What about a back house? Lots of homes have a guest house. I know many people who airbnb a back house and it pays for most, if not all, of the mortgage each month. Or lastly, can you buy “less” house? My first house was always meant to be a stepping stone. I bought the first home, my house payments became equity, the house increased in value, and a couple years later the equity in that home became the downpayment for the home I’m in now and hope to be in for a long time.
I don’t know if I want to be in this area long term
Conventional wisdom would tell you that you should aim to keep your home for about 5 years in order to recuperate the money lost from closing costs. However if you don’t feel confident that you’ll stay put for that long, there are still things to think about. For example, my very first client started looking for a home that she knew she would only live in for 2 years at most. She’s a photographer and wanted to travel and live in fun new places. However she knew that wherever she ended up at the end of those travels, she would want to own her home. And so her goal in buying was to keep it as an investment property. Other people will pay her house payments and one day she’ll sell it and buy a house in the place she wants to call home.
Conclusion
Ultimately I’m a big believer in investing in real estate and owning a home. I think owning real estate, when done wisely, can really propel you down the path to financial freedom. But the steps to get there can be challenging at times. And so, in conclusion, my advice is this. If your goal is to own your home or just to invest in real estate in general, partner with a real estate agent you can trust and begin talking about it. Whether your timeline is a month or a year, consider beginning the conversation, making a plan, and taking steps to get there. If you don’t mind, I’d like to finish with a shameless plug and say that if I can be a resource for you then please do not hesitate to reach out - wherever you are in your timeline you will not be wasting my time and I won’t waste yours either. I love my job because it’s all about serving people, so whatever that looks like for you I’ll be there!
I hope this article served some of you well. Thanks for reading, and best of luck to those of you on a home buying journey!
