The Lawhead Team would like to share the following article on what young adults need to know before buying their first home. 

Reasons Young Adults Can’t Buy Homes Today

Many young adults are sitting on the sidelines of the housing market, and there’s no shortage of theories as to why. Maybe millennials can’t land jobs that will let them move out of their parents’ basements, or maybe they’re too buried in student loan debts to contemplate adding a mortgage to their financial obligations.

But new data shows that one huge factor is the competition — some might say unfair competition — young adults face from investors who can just swoop in, drop a pile of cash and buy the houses they want. These investors then turn around and rent these properties to those same young adults for increasing amounts every year, making it even tougher for young would-be homeowners to ever save up enough money for a down payment.

As of October, a huge number of homes — one in four — that sold were bought by investors paying cash. That’s down some from the peak of a few years ago, when almost one in three houses were snapped up by cash buyers. But it’s still a far cry from the 17% of homes that were bought by investors back in 2000 before the real estate bubble grew and burst, according to the Wall Street Journal.

Investors are most likely to snap up cheap, starter homes — the kinds of houses that millennials are most likely to be looking for and able to afford. “Home supply is diminishing but investor demand is not going away,” Lawrence Yun, chief economist for the National Association of Realtors, told the Journal, which reported that the number of homes on the market below the $100,000 mark fell by about 11% in only a year.

During the height of the foreclosure crisis, investors were buying up foreclosed and short-sale properties at rock-bottom prices with the intention of flipping them and reselling for a profit once the market picked back up. But now, more are hanging onto the homes they buy and renting them out.

It’s a good move for investors who have the cash to spare already, but it’s bad news for the people who want to buy low- and mid-priced homes. Across the country, rental rates are skyrocketing: One prediction said rents could rise by an average of 8% this year, with much higher increases in in-demand markets where young adults are most likely to live and work. And this is on top of increases that have already taken place. “The median asking rent for new market rate apartments hit $1,372 last year, a 26 percent increase from 2012,” a report published in December by Harvard University’s Joint Center for Housing Studies said.  

Source: Time Money

The Lawhead Team would like to share this story from Coldwell Banker about the experience this first time buyer had with finding a new home.

Looking at Houses Too Soon

Most first time buyers think the best way to buy a home is to look at homes. In reality, the best way to start the home buying process is to speak to a mortgage provider. It could be a bank, credit union, or mortgage banker.

Because the buyer went looking too soon, they began looking in the wrong price range, which was higher than what they were qualified for and were disappointed at first with the homes in their price range.

Counseling Session with Your Real Estate Agent

At first, the buyer did not think it was necessary to have a counseling session with their real estate agent. The counseling session is essential for the agent to become an equal partner in the home search and buying process. This is where the agent asks the first time buyer questions like why they are buying a home, if they have spoken to a lender, what are their needs, what are their wants and preferences. If an agent knows the big picture, we can be more of an asset to the first time home buyer, not just a direction follower.

Excitement — Delay — Disappointment — Excitement

In our continuing story of a first time buyer, the buyer found a house that was in their price range, and it met most of their needs and wants. However, the buyer took too long to think about it and another offer was accepted. So we continued searching.

Our first time home buyer was very excited to look at more homes, so excited they forgot to tell their agent and went to an open house and spoke with the listing agent. The first time buyer told the listing agent how much they loved the home and were getting desperate to find the perfect home and their house was the one. The first time home buyer did tell the listing agent they had their own agent, which was good, but unfortunately most of the negotiating power was lost.

“My Cousin Can Do the Inspection”

Many first time home buyers do not have much extra cash so they are hesitant to hire a professional inspector. Luckily, they listened to advice, had an inspection, and resisted the temptation to have a cousin come by and take a look at it after work one day.

Sometimes You Should Just Pay an Expert

And to bring the story of our first time buyer and the home buying process to an end, the buyer was very hesitant to use the services of qualified title attorneys to prepare the necessary paperwork to buy the home. It can be a pretty complicated process, one that should not be left in the hands of a family friend that does not specialize in residential real estate.

All in all things turned out well in the story of the first time buyer because first time buyers do trust their real estate agents and are very willing to do what they are advised to do by the experts in the world of real estate. Because of this, I love first time buyers.

Ready to buy your first home? The Lawhead Team is here to help!

The Lawhead Team would like to share a recent article from Realtor®.com about buying your first home. If you are new to home ownership, read these steps to getting ready to own your first home:

Firm Up Your Finances – Anticipate the new costs that you will incur, such as taxes, homeowners insurance, utility bills and commuting. This will help determine the maximum price you can spend on a house. If your daily budget will change with your first home, consider a trial run living on that budget for a few weeks, to make sure you can. Enlisting the help of a financial expert will give you an objective view of your finances. Remember, the first year is the most difficult. After that you will begin receiving tax benefits.

Partner With an Agent – Even though the Internet gives you access to endless amounts of market information, don’t be tempted to go it alone. Instead, interview several real estate agents and find one you like who listens to you. He or she can line up properties to view, answer many of your questions and make connections for you in your new community. Agents often have the inside track on new properties just coming on the market.

Accept Some Risk – Realize that there is uncertainty in everything, but no matter what happens, you will deal with it. Ask family and friends about their experiences and learn from them. Be sure to keep some cash reserves in the bank as a safety net. And remember, you have homeowner’s insurance for a reason.

Fine Tune Your ‘Must-Haves’ – Is there a community that you absolutely must live in? Are you adamant about a garage, a fireplace or a finished basement? Make your list of what’s vital. You may find that you are willing to sacrifice one feature if the rest are fabulous. If you are not crazy about the house, don’t bid. It’s important that you love it at the outset.

Be Ready to Bid – Regardless of the market, great houses do not stay available for long. One open house can lead to three offers. If you love it, be ready to make your best offer. If you are wavering, ask yourself, “How will I feel if I don’t get this house?” You might just get it, and if not, at least you will know you tried.

Reap the Reward – Owning a home can be one of the most exciting and satisfying things you will do in your life. A first home is an investment that can pay you personal dividends as well as financial benefits.

Read entire article about preparing to buy your first home from Realtor.com.

With a housing recovery seemingly on its way, mortgage rates still low and home prices at a reasonable price, real estate experts are saying now is a positive time to make a first home purchase.

Unfortunately, it is not that easy for young singles and couples to purchase their first home.  Compared to the boom market days before the recession, it is a lot harder to buy your first home now.  A good idea is to have a debt reduction and savings program in place.  Although it could take a year or two to complete, you will then be in a position to meet the expense of purchasing a home.

Here are some questions to ask yourself: Are you willing to reduce your spending and cut debt to buy a first home?  And are the sacrifices worth it?

If you have steady employment and are certain to stay in the same area for at least five years, you are better off buying than renting.  If you do have the opportunity to purchase your first home now with a fixed rate mortgage and in a neighborhood with rising prices, chances are you’ll do better owning than renting.  This is because you will have better control over your living costs and don’t risk the chance of facing rising rents in your area.

If you are young and wish to buy your first home in the near future, we would like to share a few tips:

Review your current financial picture carefully. It may seem obvious but it is important to avoid out of control spending.  First analyze where your money has gone.  Categorizing your spending for the past three to six months will help you with this.

Create a spending plan which meets your basic and top priority needs while still letting you save for a first home.  Scrutinize every category of your spending in search of possible reductions.  Expenses like car and restaurant bills usually can be thinned out a bit.

Ask yourself if you are willing to change your transportation spending. Is it possible for you to get rid of one of your cars and take public transportation to work? Are you paying for a gym membership you never use? Try cutting your energy use by seldom using the air conditioning unit.  Ask yourself how much you spend eating out every week.

Reduce credit card debt. Student loans cause many people in their 20’s and 30’s to accumulate substantial credit card debt.  Being serious about owning a first home means living on plastic is not going to work anymore.

Don’t let others talk you out of buying a first home if that is your goal. If you have the courage to buy soon and choose a place in a solid neighborhood, you should see tangible benefits within three to five years.

Do you have questions about home ownership and need a hand to help you through the process or purchasing your first home?  Talk to us, The Lawhead Team.  We would love to help.