Are Your First-Time Homebuyers Seem to Disappear in Today’s Turbulent Market?

Well, You (and they) Are not Alone: All those speaking out against today’s residential real estate market claim they have never encountered anything similar – neither inflation in the 1970s, nor high-interest rates in the 80s, nor the housing crisis of 2000 could prepare us for such volatility!

First-time buyers need help, too! First-time buyers might even feel more confused than us about where to begin their buying experience. We can aid them by breaking it all down for them step-by-step.

What We Are Doing and How Did We Arrive: Spring Year-Over-Year

Lower Inventory Is At The Root Of The Problem

No one seems to have anything for sale right now – a few home sellers and first-time buyers are struggling to locate properties available. Our chart shows inventory levels have dwindled by 25% every year since July 2022 – yet another indication of falling demand and supply shortage.

Existing home sales decreased 2.4% monthly during an otherwise active springtime season, signaling alarm. National inventory levels of single-family houses for sale have also declined below two months’ supply compared to their normal six-month inventory levels.

What’s Going On? Reasons behind low inventory levels for first-time homebuyers may include:

• Developers had begun slowing new construction during COVID and more recently when mortgage rates skyrocketed, and all sorts of talking heads and editors predicted a recession.
• Owners looking to move out are dismayed at the current housing market, questioning: ‘Even though I could sell my home, where will I relocate?” Homeowners with reduced mortgage rates who are locked into low rates fear their rates might soon double, reducing their joy for moving.
• Property prices remain elevated as investors and cash buyers purchase properties at record levels.
• First-time homebuyers and agents often experience frustration. While buyers have spent months planning and saving up, they need your assistance to locate their dream house on an ever-increasing MLS database.

Many predicted home prices would drop when mortgage interest rates started increasing; however, demand and supply still influence home values to stay high; inventory levels have reached an all-time low, and sellers can ask for and get top dollar, even though this might not compare with early 2022 levels.

The graph depicts an astonishing property price increase of over $100,000 over four years.

Let’s put these data points into proper perspective by comparing the affordability index from the National Association of Realtors for the first quarter of 2020 with that for the second quarter of 2021.

As first-time homebuyers, this scenario paints a dire portrait.

Mortgage rates last year saw mortgage rates escalate quickly. Indeed, at this moment, the Fed just raised them by one-quarter point, and mortgage applications are steadily decreasing (having seen major spikes previously). The market responded as predicted.

As an agent, you know how rates affect your client’s purchasing power. Rate fluctuations are particularly hard on first-time homebuyers who need more equity from an existing property to use as equity when financing their new purchase. We will compare what an average buyer could afford under 2020 rates versus 2023 rates:

Math can be stunning; when considering loans, homebuyers who compare the total debt over their loan term to last year often witness dramatic variations between now and last year.

Current inventory for homes below the basement floor level is limited and costly, making each dollar you invest go further.

Working with first-time buyers right now is more complex as it adds up. Their emotions run high; they are exhausted from competing against 56 offers per table; no one knows which offer could be any better; everyone feels helpless until we close on an offer we think could work better than another one we were initially considering.

Concerns may exist around the market in spring 2023: should I search for new opportunities or embark on another path to professional fulfilment?

That answer is unequivocally no! There’s good news in store, as real estate agent success awaits you, with first-time home buyers becoming first-time homeowners through your services.

Put down that brochure about multilevel marketing, order another margarita and relax. We may experience more bumps on this journey to normalcy but will eventually reach calmer seas with its return to regularity.

Does Hope Exist in Our Future For Home-buyers? There is hope for our future, not because someone had another margarita – numbers tell us so.

Start with mortgage rates. An increase of one-quarter point was anticipated and priced into existing rates as of May 3.

Due to recent bank failures, debt ceiling talks, and inflation cooling off, confidence in the Federal Reserve seems high for its interest rate increases to stop. When they announced their latest increase in New York, Fed Chairman Jerome Powell declared, “We may or may not even be there,” signaling they could now stop their policy of steady-rate increases to control inflation.

Compass U.S. The Region President Neda Navab and NAR publicly forecast that mortgage interest rates may enter an extended period of stability by year-end; predictions indicate this at about 6-7%.

Inventory indicators show an upswing. According to a Census Bureau report for March 2023, completed home construction increased 12.9% yearly; 1,542,000 additional new houses were constructed between March 2023 and 2022.

California is one of many states reviving and renewing their homebuyer loans programs for first-time home buyers, having dispersed $300 Million within weeks despite initial hesitation to release all this capital to new homebuyers. Detroit also recently launched its initiative that allows families with down payment assistance programs.

No matter the difficulty, life goes on regardless. People move, inherit property, get divorced and even relocate schools; opportunities still exist even though fewer opportunities may present themselves than usual.

What to Do for First-Time Homebuyers

Being successful may not always be easy, but even in difficult circumstances, there can be opportunities for growth and advancement. A great agent shows professionalism rather than crying or breaking objects while helping first-time buyers weather any stormy periods they encounter.

Stay Empathetic

It can be easy to forget that no one is responsible for our current economic woes; nor should the pandemic that caused new construction to slow and buying to increase be seen as their responsibility; the turbulent forces governing the economy cannot be managed directly; instead we should try our hardest not to get frustrated over these matters by keeping an open mind, being sensitive and empathic with your clientele’s struggles instead of becoming frustrated; these people have real goals, constraints and stresses they face every day!

Do not despair: you might still find them frustrating if they insist upon having their father present to supervise an inspection or allow their children to swim during a show.

Network Every Chance You Get

Knowing yourself in these markets is essential; keep your ears tuned in. Maintaining relationships with agents you already know while meeting new ones will prove extremely fruitful.

Building relationships among your colleagues can bring many rewards: pocket listings, tips on distressed properties or even back channels where sellers may be considering offers.

Be Prepared to Act Swiftly

Buyers typically have more time to make decisions than sellers, with longer properties on the market and fewer competing bids, but be mindful that everyone in your client base and all first-time buyers want the same thing: to find an unmissable gem!

Ensure all your client’s financing documents are current, stay in contact, and arrange showings quickly when a new property becomes available – this gives buyers time to evaluate all their options before jumping in too early!