Hello, LOs!
Yep, it's official. First-time homebuyers in this market are screwed. At least that was the consensus of the LOs who responded to yesterday's edition of LL.
"The first time home buyers are not being edged out as much as they are being shoved off a cliff," wrote one Pacific Northwest LO. He listed some other challenges first-time homebuyers face:
1) When they purchased their home previously they probably purchased at maximum financing for them due to current monthly debts and such. Which means with higher interest rates and horribly high sale prices they are moving to the same type/size home they are currently in regardless of how much money they are putting down.
2) Jumbo loans are becoming more of an option but those requirements are still challenging to be approved versus High Balance/Conforming guidelines.
3) One thing nobody is talking about is property tax increases coming… Counties are assessing homes with a [much] larger increase than expected and homeowners' payments are going to increase much more than expected, which then hurts new buyers trying to qualify due to much higher property taxes.
4) New construction has hit a new level in my area of $400 to $590 per square foot. Here is the good news… I have been doing this for 29 years and no matter how bad I thought it was, I made it through it and so did my clients. Eventually these rising rates will create another refinance boom and hopefully more inventory then a buyers market.
Gary Hughes, an LO in the Los Angeles area, added:
"You hit it on the head – first time buyers with modest and even respectable down payments are getting crushed out of this market," he said. He cited a recent example in which his client came in with 45% down on a $1.1 million listing. After seven counteroffers, his client raised the offer to $1.225 million and waived the appraisal. The home instead sold to a buyer who offered $200,000 over list price with 60% down approved by Morgan Stanley, with no appraisal. There were also cash offers well above list price, according to Hughes.
"This will remain a challenging market for buyers without large down payment ability," he said. "And I see little help on the way with minimal inventory and supply chain and employee shortages creating a lot of new houses... Even a modest recession will only take some of this steam out of the market."
James Kleimann
Managing Editor, HousingWire
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