Single family homes in America are more expensive today than they have ever been. In August 2019, on a national basis, the median price on existing homes rose for the 90th straight month. However, inventories are slowly improving, and prices are growing at a much slower pace and, in many markets, sales have been relatively soft even at today’s low mortgage rates.
For many buyers, the lack of affordable homes is delaying their entry into homeownership, and delay can be expensive. Studies show that the sooner a young buyer can buy their first home, the more successful they will be in building equity. There is a $72,000 difference in the median housing wealth of those who bought their first home between ages 25 and 34 and those who waited until they were 35 to 44.
Homes.com’s state-of-the-art platform includes local market information and tools that can help you land a good deal on a home. They can also keep you up to date with the most current listings and local market data from multiple listing services nationwide.
You can augment your search with additional resources from the government and elsewhere to find houses that are not available on any listing service if you know where to look. Once you are plugged in to key resources on Homes.com and other sources, you may be able to land a new home in these times of remarkably low interest rates.
- Look for recent price reductions. Sellers lower their price grudgingly, often after a home has failed to sell during the summer months and sellers want to get the deal done before the end of the year. To find recent price reductions, click on the “price reduced” filter on the “sort by” tool on the top left of the sort page. However, homes that haven’t sold could also be “turnkeys” that aren’t selling for a good reason, so be careful. See the cautionary note below.
- Find aging listings. To find the number of days a listing has been on Homes.com, go to the listing and scroll down to “Home Details.” Click on price reductions. The average listing spends an average of 30 to 40 days on the market before sellers accept an offer. However, time-on-market differs significantly from one market to another. Your real estate agent can provide you your market’s information, or it might be listed on the website of your local multiple listing service. If your market’s average is more or less, that’s an indicator of local demand. It could also be an indication that there might be a problem with the house.
- Buy a foreclosure. You can save as much as 25 to 35% by buying a foreclosed home. You can also find foreclosures at government sites like HUD and VA, Fannie Mae, Freddie Mac, and state housing finance agencies. Many foreclosures have been vacant for many months, and previous owners probably didn’t do an adequate job of maintenance. (See cautionary note below.)
- Buy a short sale. Short sales occur when owners cannot make the mortgage payments and the lender agrees to sell the property for less than the owner owes on the mortgage. Though the lender takes a “short” loss, it’s less costly than going through a protracted foreclosure only to lose as much or more. Short sales are relatively rare these days. There is less competition for short sales than foreclosures, and the properties are generally in better shape. Some multiple listing services that make their data accessible to consumers list short sales. It’s probably easier to ask your agent to search for you. For more information on buying a short sale, check out this information from Freddie Mac.
- Move to a more affordable market. In the second quarter of 2019, the median cost of a single-family home in the Chicago market was $278,100. In Cleveland, it was only $169,000. The home prices in different markets vary so much that a first-time buyer can cut years off the time it will take to save for a down payment by moving. Faced with shortages of affordable homes where they live, more and more young buyers are moving to markets where they can afford to buy.
A recent study by the National Association of Realtors found that in the majority of the top ten markets popular with millennials, the unemployment rate is lower than the national average, and home prices are generally lower. Based on the area average income, millennials in these markets can afford to buy one out of four homes listed for sale. In more expensive markets like Dallas, millennials can afford just 10% of the listed homes, just 13% of the listings in Boston and barely 2% in San Diego, according to the NAR study.
Be Careful and Protect Yourself
Homes that take a long time to sell or have had their price reduced have already been picked over by other buyers. Others have passed on them for a good reason. Perhaps they were priced too high, or they may have flaws that would be expensive to fix.
Have any property you are considering inspected by a professional inspector as soon as you can and include a contingency clause in your offer that will allow you to get out of the deal if the house fails inspection. Ask the inspector to estimate costs to fix any problems and add these estimates to the price of the home to arrive at your actual purchase price.
You cannot add contingency clauses to foreclosure contracts, which increases the risk you incur with foreclosures. With homes being sold by the owner, ask the owner to fix problems you identify before closing or reduce the purchase price to account for what you will spend to put the property in proper shape.