And what does that mean for first time buyers?
With housing prices having bottomed out more than five years ago, the economy has strengthened, and mortgage rates remain low. These seem to be perfect conditions for a strong spring market, but that's not what is happening.
What's holding the market back is the low number of houses for sale. Among the reasons for that condition is the fact that in the past few years more rental units than condominiums were developed and built. Another reason is that baby boomers, who thought about down sizing, decided to stay put and renovate instead. The reason that, in turn was that there was little inventor for them to buy. These trends pushed down the number of homes for sale to the lowest level on record at the end of last year.
Meanwhile, millennials are starting to become more open and interested in home ownership. According to the National Association of Realtors 2018 Home Buyer and Seller Generational Trends study, slightly more than a third of all home purchases were made by millennials over the past year. The increased demand of this new group of buyers further contributed to the shortage of houses on the market.
In my experience working with first time buyers, I have learned that if you ask yourself the following few important points, you'll be better prepared for the competitive market:
- What can you afford? Before you even start looking at homes, do the math of how much you can comfortably afford. Talk to a mortgage expert to tell you how much you can qualify and then determine the price of the house you can buy.
- What do you want versus what do you need? Define your priorities! Is it a short walk to the train, a certain school district or the proximity to a park? How many bedrooms do you need? Parking spaces? Once you define these needs, you can think about what you'd like - your dream kitchen of a steam shower?
- How much do you offer on a home you are interested in? Should you go in with a low offer on a property that's been on the market for a while? Should you offer full price in a hot market? Your real estate agent is the best person to guide you with this.
- What is involved in the closing process - again, talk to your broker to let you guide through this process.
Posted by Andreas Holder on