First-time home buyers struggle in tight market

APPLETON – Abby Davis searched for a year before she found her new home in Oshkosh.

She looked regularly on Zillow, Realtor.com and other websites, kept up with managing her finances for getting a mortgage and looked at up to 30 houses in the Oshkosh area before settling on one in July with her boyfriend and his two children.

Davis considers herself lucky.

“I felt like it was pretty easy compared to some people I know,” Davis said. “They go through like a hundred houses, and I didn’t have that.

“Being by myself, I probably would’ve been more lenient of everything but with having a boyfriend and two kids, you got to look for more depth in what you really need.”

Davis bought her house for $125,000, which falls into the entry-level home price range in the Fox Valley — the most common financial bracket for first-time home buyers.

Judy Schroeder, a real estate agent with W.E. Smith Realty in Appleton, said houses that range between $100,000 and $140,000 are the ones going “insanely fast,” putting pressure on

first-time home buyers to make decisions quicker than they are comfortable with.

The same is true across the state. Entry level homes in Milwaukee and its surrounding suburbs have been tremendously competitive for months. New buyers are not just competing with each other, they’re competing with baby boomers who are downsizing.

“The market is insane right now,” Schroeder said.

“(First-time buyers) have to make a split-second decision, which is really hard if this is your first home . ... You have to decide on the spot, then go back to the office and make an offer and then you may be one of multiple.

“The job market is terrific right now. Most people have jobs that want jobs, they have that security to be able to get a mortgage.”

Dani Cloghessy, who bought her house with her husband in Grand Chute last October for $185,000, said she felt the competitive market even at that time.

“There was a lot of competition from other buyers,” Cloghessy said. “Homes within our budget were going so quickly.”

Cloghessy said her search was only a few months long but she had to practice not to get her hopes up when looking at homes. At one open house, she said just as she pulled up to the house, the real estate agent told her there was already an accepted offer on the house.

Houses could literally be off the market within a couple of hours, Cloghessy said.

Despite the shortage, housing in Wisconsin is particularly affordable right now, said Mark Eppli, director of the Graaskamp Center for Real Estate at the University of Wisconsin-Madison.

The average cost of a house in the portion of the state that runs roughly from Fond du Lac to Green Bay in July was $157,000. The mortgage interest rate was about 4.5 percent, according to Eppli.

“In the state of Wisconsin, housing is really affordable (now),” Eppli said. “You need a job that makes $20 an hour; you could buy an average home in Appleton.”

David Clark, an economics professor at Marquette University, said there are a few factors that impact first-time home buying, for better or worse.

“One advantage since they’re firsttime buyers, they’re not coming in with an offer that’s contingent upon the sale of the home that they currently own,” Clark said.

That’s a plus. But financial security remains a concern for first-timers, especially young adults, Clark said.

“Student loan debt has plagued millennials,” he said. “Those saddled with more debt will find it more difficult to get a loan . ... Even if they do qualify for a loan, it may be difficult.”

In the latest report by the Wisconsin Realtors Association, August home sales increased 3.3 percent compared with August 2017, and the median cost increased by 5 percent.

Schroeder said it’s an important time for buyers to get their finances in order to ease them through the process of home buying.

One piece of advice: Get lender-verified mortgage pre-approval, not just a pre-qualification based mostly on what the borrower tells the lender is his or her income and debt. The more-stringent pre-approval offers a complete picture of the borrower’s financial situation, and can shave up to three weeks off of the time needed for a loan commitment.

“Buying a home or selling a home is a very emotional process and one that really affects any age group.

“It’s a lesson for buyers to come in with good credit ratings; they have places they can go to check on mortgages for some options in that regard. It’s a really difficult time for home buyers.”