The transition from apartment renting to owning your first home rests mainly on a foundation of finances. Typically, you save up now so you can buy later. Chances are, you’ve heard about the cities where homeownership is almost impossible for new buyers to obtain (San Francisco, anyone?). But, there are other cities where the price of owning a home isn’t just increasing — it’s accelerating with each passing year. Or, maybe it’s the rent costs that are growing too quickly. Either way, if you’re thinking about buying in the Midwest, you may want to consider Lincoln, Nebraska before the prices run away from you.
The capital of the Cornhusker State, Lincoln, Nebraska provides residents with a blend of city hustle and country calm. Part of an area known as the “Silicon Prairie,” the region of over 300,000 people is becoming a hotbed for startups in the tech industry. Aside from its diverse business climate, Lincoln provides residents with strong schools, a low cost of living, and access to cultural experiences at a fraction of typical urban settings.
On average, the cost of all homes in the Lincoln area has appreciated about 4.64% per year since 2018 according to data from Nebraska Realty.
Homes.com data shows that starter home* appreciation is even greater. Over the last five years, the average appreciation rate has been 5.75% per year, while the last three years have averaged 7.8% each year.
According to Andy Alloway, president of Nebraska Realty, the median cost of a home in Lincoln right now is about $209,000. Two years ago, it was about $191,000, meaning 2018 buyers are now averaging about $18,000 or more in equity simply for owning.
On the other hand, renters of apartments and single-family units are paying about the same monthly costs as owners, but missing out on those equity dollars. A 3-bedroom, 2-bathroom unit runs about $1500-$1600 a month. And while renters aren’t seeing the same price appreciation as owners, they’re still seeing significant cost increases of 4-5% every year.
Why Buy Now?
Median income in the Lincoln area has been trending downward since 2016, with the latest figure at $58,506. With starter home prices accelerating, and rent prices steadily increasing, this may not leave much financial wiggle room to wait much longer.
What to Prepare for
Inventory continues to be a pain point in Lincoln, so expect competition. “We continue to experience multiple offers in a short period of time, “ says Alloway. “Two weeks ago, we listed a $135,000 house. Within two days, we had 147 requests to show and 15 offers, and it went for $12,000 to $15,000 above its original listing price.”
Because it’s a seller’s market, renters transitioning to ownership in Lincoln may encounter those same price hikes, which in turn may delay their realization of equity in the short-term. But as we’ve seen already, with the steady appreciation, it doesn’t take long to recoup those costs.
“Be patient, and stay in constant communication with your agent,” says Alloway. “They can help you figure out your offer structures so you don’t overpay. Do your research in advance, and remember that if you can wait, it’s sometimes better to buy in the colder months to get a better price. Finally, make sure to enter the process with a preapproval and have as much down payment as you can.”
*=Starter homes defined here as those listed in the lower third price bracket of the local market.