Homebuyers: Coping Skills for a Brutal Market

This year is turning into a brutal one for those aspiring to move out of a rental and into a place of their own.

A confluence of factors is making it much tougher to break into first-time homeownership. Housing experts say the latest statistics, showing soaring home prices, are especially worrisome for would-be buyers. Meanwhile, available properties are scarce.

“The inventory of homes on the market remains woefully depleted,” says Lawrence Yun, chief economist for the National Association of Realtors (nar.realtor).

Compounding buyer misery is the rise in mortgage rates due to the Federal Reserve’s steps to combat inflation.

What’s more, rents are ascending — putting the squeeze on wannabe buyers struggling to amass enough savings for a down payment and closing costs.

“Tenants are caught between a rock and a hard place. But staying in your rental indefinitely is hardly the best solution financially,” says Eric Tyson, the co-author of “Home Buying for Dummies.”

Fred Meyer, a veteran real estate appraiser and broker, encourages wannabe buyers to regroup rather than back off.

“It’s so important to own rather than rent because of the stability that comes with a fixed-rate mortgage. Your base payments never rise so long as you hold the loan, while rents always go up,” says Meyer, who’s sold homes around Harvard University for more than 30 years.

Though 2022 is proving another vexing year for buyers, Meyer always seeks to dissuade his clients from making an impulsive choice or offering an absurdly inflated price just to triumph in a bidding war.

“The sky is never the limit,” Meyer says.

Here are a few pointers for first-time buyers:

Get to know a local mortgage lender.

“In this market, mortgage preapproval is imperative if you want the best possible deal ... By showing your financial stability, it undergirds any offer you make,” says Merrill Ottwein, a longtime Coldwell Banker broker.

He recommends buyers meet face-to-face with a local lender and advises against dealing with any firm that claims they can do preapprovals online.

“I’m not in love with internet lenders. In most cases, you can’t find them when you need them,” says Ottwein, a past president of the National Association of Exclusive Buyer Agents (naeba.org).

Search for a home in the strongest neighborhood you can afford.

“Look for a very viable neighborhood with strong schools and good owner upkeep, not one where many homes have fallen into disrepair,” he says.

Ottwein believes buyers should be especially wary about a location where many people have lost jobs due to a plant closure or the shutdown of a military base.

“Avoid at all costs an area that’s taken a big hit on joblessness, unless it’s already bouncing back,” he says.

Watch out for an area that’s developing problems.

Ottwein advises buyers to scratch from their list any neighborhood that’s located very close to a major roadway or has a lot of cut-through traffic.

He also advises buyers against locating in a community bordered by industrial or commercial buildings that are in decline. For example, you wouldn’t want to live near a strip shopping center with many shuttered stores.

In addition, Ottwein says buyers should be careful to check into any community with vacant land that could be developed in an unpredictable way. You wouldn’t want to wake up one morning to discover a big-box store going up across the street, for instance.

“The only kind of vacant land you want to live near is a nature preserve or publicly owned land that can never be developed,” he says.

Seek the best available home in your preferred community.

Once you’ve found the best neighborhood in your price range, it’s time to identify the ideal home there.

“You want a place that meets your lifestyle needs now, but down the line also offers good resale potential,” Ottwein says.

Buying with future resale in mind isn’t necessarily about choosing the most luxurious home in a neighborhood.

“It’s almost never wise to buy at the top of a neighborhood price range. Historically, these homes are pulled down with the averages. But smaller homes are pulled up when appraisers judge their value,” he says.

Still, any home you buy in a family neighborhood should meet several minimum requirements. It should have a floor plan that flows, at least three bedrooms and a garage suitable for one or two cars.

What features can you sacrifice to break into a strong neighborhood?

Ottwein says you can feel comfortable trading off a formal living room, a twostory foyer at the entrance or a swimming pool. Also, feel free to let go of the need for an extra-large yard or high-end professional appliances in the kitchen.

Homes that need extensive and costly renovation work — so-called “fixers” — are often a false bargain even if wellpriced. But fairly priced properties that require only minor upgrades, like fresh paint and new kitchen tile, can save their buyers a bundle.

“The key for buyers is to distinguish between a house with little problems that are fixable for a small sum and a house with big problems that would cost a fortune to fix,” Ottwein says.