New Year, New Home? What to Expect If You Plan to Buy in 2017 by Nerdwallet
The real estate market is looking better for first-time buyers, so 2017 may be the year that many young buyers finally step off the sidelines and into the market.
After slipping for three straight years and hitting a near-30-year low of 32%, the share of sales to first-time homebuyers rose to 35% this year, according to the National Association of Realtors’ annual Profile of Home Buyers and Sellers. That’s the highest share of first-time buyers since 2013, when they made up 38% of sales, but well below the long-term average of 40%.
The long-awaited influx of young buyers into the market is likely to continue and may help drive home sales in the year ahead. For anyone whose specific goals for 2017 include buying a home, here is a look at what to expect in the market, along with five tips for achieving your homebuying goals.
WHAT TO EXPECT
First, mortgage credit is still tight from the downturn and years of stringent underwriting, but the outlook continues to improve. Mortgage interest rates are around 4%, and despite recent increases, rates remain close to their historic lows. An increasing number of lenders also now offer loans with as little as a 3% down payment.
Second, it may take time to find your dream home. The most recent data from NAR show that the supply of existing homes for sale is insufficient, and new home construction is not meeting demand. More buyers are competing for a smaller number of affordable homes than a year ago, so you’ll likely be touring open houses and listings with many of the same people.
Third, home prices are steadily rising. With demand rising and listings scarce in many markets, NAR forecasts home prices will increase nationally about 4% in 2016 and 2017. In cities with the tightest of supply, prices could rise more than double that (10% or more) over last year.
» MORE: How to buy a house
TIPS FOR SUCCESS
Start planning now
It’s good to begin planning a few months in advance of your home purchase. Start your home search by selecting a real estate agent who knows the area where you want to buy. Ask family and friends for recommendations; it’s important to select someone with whom you feel comfortable, since you’ll be spending a lot of time with him or her. I recommend choosing a Realtor — a member of NAR. Such agents are bound by the NAR code of ethics.
A Realtor can be an expert companion to help you find homes in your price range and can market you to sellers as a serious buyer. And when the time comes, a Realtor can develop a negotiation strategy to help make your purchase offer stand out among any others.
Get preapproved for a mortgage
Gather your paperwork and talk with your real estate agent, who can suggest lenders to help guide you through the mortgage application and closing process, explaining what you will need to provide along with your loan options and estimated costs. When you are determining your final budget, make sure you consider the other costs of homeownership, such as taxes, maintenance, insurance and home utilities.
Identify your needs vs wants
No home is perfect, and many people have to compromise on features when buying an existing home. At the same time, you don’t want to end up settling for a house you don’t love. Prioritize your needs and wish-list items from most important to least.
Start looking and be prepared to act quickly
Based on your discussions with your lender and help from your real estate agent, visit neighborhoods and homes that align with your budget and needs. In markets with tight supply, multiple offers and bids above asking price are common, so the pressure may be on to move quickly. Don’t worry too much, though; it’s not uncommon to lose out on a few homes before the right one comes along. Keep at it!
Make a realistic offer
In today’s competitive market, your offer may not be the only one. Your real estate agent can make recommendations and supply you with comparable sales of similar homes in the area so that your offer is consistent with those sales prices and stands out among the rest.
Buying a home can be challenging, and only you can decide whether now is the best time for you. But if you are in the market to buy a home, 2017 is a great time to start looking.