What to do to be successful in a tough market
Lauren Niesz purchased a new home with her boyfriend in January after they were able to save more cash during the pandemic.
Source: Lauren Niesz
Like many people forced to work from home after the onset of the Covid-19 pandemic, Lauren Niesz, 26, found the conditions were not necessarily ideal.
Niesz, who rented a townhouse in southern New Jersey, found herself often working from a closet so that her live-in boyfriend’s work calls did not interfere.
Moreover, the couple’s now 2-year-old dog required frequent walks around the neighborhood.
After seeing an online sketch of a brand-new home, Niesz contacted her realtor and put in an offer in September. Last month, they closed on their newly constructed home in Howell, New Jersey, complete with a backyard for their dog.
Much of the couple’s progress in accumulating a down payment happened during the pandemic, according to Niesz, a technical product manager at Comcast.
“We were able to save so much money because we weren’t going anywhere or doing anything,” Niesz said.
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A survey from real estate company Redfin found that stimulus checks and the ability to save more money during the pandemic were among the top ways recent first-time homebuyers were able to save for their down payments.
While the rule of thumb is typically to put down 20%, the National Association of Realtors finds most homebuyers put down just 7%, according to Nadia Evangelou, senior economist and director of forecasting at the real estate industry trade association.
That’s as millennials — the generation born between 1981 and 1996 — enter homebuying age while facing market conditions that make it even more difficult to buy their first home.
Home inventory for people who typically qualify as first-time homeowners — with incomes between $75,000 and $100,000 — is at record lows. In 2021, there was one listing for every 65 households in the starter-home category, according to Evangelou. In 2019, there was one listing for every 24 households.
“We see a drastic drop in the options they have,” Evangelou said. “They have fewer homes that are available for them that they can afford to buy.”
Still, there are some conditions that could tempt first-time homebuyers into the market now.
Mortgages will likely get more expensive, as the Federal Reserve considers raising interest rates to curb inflation.
Moreover, with rents up significantly from last year, buying a home would eliminate the uncertainty of worrying how much you will have to pay next year, Redfin chief economist Daryl Fairweather said.
“At least when you buy, you get to lock in your monthly mortgage payments,” Fairweather said.
But sealing the deal on a transaction can be more difficult, as first-time homebuyers are more likely to compete with multiple bids on homes, including those from existing homeowners and those willing to pay…