New homeowner: ‘I just had no idea’
It’s not impossible to find a home, but 1st-time buyers have their work cut out for them in this market
Katherine Metcalfe, as a first-time home buyer, had an advantage over experienced shoppers when she went looking to buy a place of her own at the start of summer: She didn’t have a house to sell first. So there was no home sale contingency in the purchase contract she eventually signed. One less headache. ● But Metcalfe still got put through the ringer of a housing market that is still like no one has ever seen, although it appears to be cooling as mortgage rates try to tiptoe upward. “I just had no idea what the housing market was like,” she said.
Metcalfe, 25, is from the Houston area. She attended Oklahoma City University. When she graduated with a music degree, she moved to New York, but not for long. She decided to move back and buy a house rather than rent an apartment again.
She started looking in June, with help from Heather and Alan Davis, agents with RE/MAX Preferred Properties.
Multiple offers are the norm in this housing market
“They kind of warned me up front that I would have to make multiple offers,” Metcalfe said. “Over the course of the summer, I looked at lots of houses. I think I put in three different offers, and learned you have to put in more than asking price.”
First, it was a couple of thousand more, then $5,000 more, then $9,000, “and I still didn’t get a house,” she said.
It was frustrating enough that she had to adjust her price range down to be able to go $8,000 to $10,000 over the next time.
She said she kept finding listings with built-in deadlines for offers. All offers in place at, say, 5 p.m. Tuesday, would be considered. Inexperienced would-be buyers can get shut out of a situation like that.
Finally, with a summertime of experience, Metcalfe made an offer on a home near NW 34 and Portland Avenue for $10,000 over the asking price.
It was another miss. And it hurt.
Advice for first-time home buyers: Don’t get your hopes up
“Alan and Heather warned me: ‘Don’t get attached. Don’t get your hopes up too high.’ But you can’t help it,” she said, recalling how she imagined organizing the kitchen and arranging her bedroom.
But this time, the machinations of the market turned in her favor: The offer that beat hers fell through, so the sellers turned to her second-best bid.
They accepted it — $10,000 over asking — but insisted on an “appraisal gap clause” — meaning she would cover any gap between the appraised value and the contract price. Lenders base loan amounts on such professional valuations.
With that, her dream of home ownership finally came true: a two-bed, onebath, 1,120-square-foot house, built in 1962, for $155,000.
That was 20% more than the last time it sold, just 15 months before.
Such is the tenor of the market. Prices went up fast, thanks to persistently low mortgage rates and demand driven partly by out-of-state investors.
And homes listed for sale don’t sit on the market for long. There’s still a shortage, just a single month’s supply locally, according to the Oklahoma City Metro Association of Realtors.
A six-month inventory is regarded as balanced. This market is still owned by sellers.
Median and average home prices are up and firm in Oklahoma City
The median sales price here in September, $235,000, was up 9.3%, and the average price, $268,490, was up 8%, year over year, according to the Realtors.
Year-to-date through September, the price hikes are even higher: median up 12.1%, average up 11.5%, the Realtors reported.
“I was almost to the point of giving up looking right now,” Metcalfe said.
Even after the deal was struck, after the ordeals of the search, she wondered: “Did I? Did I get it? I something else going to fall through?”
She did get it. Everything held.
“It was a whirlwind of a time,” she said.
Realtors get creative with first-time buyers’ home purchase offers
It takes some doing for first-time home buyers to find their way in this market, Heather Davis said.
“We’ve had success getting several first-time buyers into homes this year. The one advantage is they don’t have a house to sell,” she said.
She said Metcalfe did what she had to do.
“Most of our buyers did ‘win’ their houses using appraisal clauses and coming in a little over list price on homes that were new on the market,” she said.
Davis said from the sellers’ perspective, “On our listings that were in the first-time buyer market, we averaged seven to 12 offers and same thing with appraisal clauses, ‘as-is,’ etc., being the things that helped those offers get accepted over the investors’ offers.”
It’s a tough market for buyers, but not impossible, said Kacie Kinney, an agent with Keller Williams Elite.
“For those who are thinking of buying a home soon, it will happen, it just looks a little different this season,” she said in her monthly e-newsletter, offering some buyer tips.
“Expect to lose out on five to 10 homes prior to getting an offer accepted. This is a market norm right now,” Kinney said. “Home warranties are practically nonexistent in this market. Sellers are hardly paying for concessions.
“List-to-sales price is still 100%, so expect to pay the list price and even over in some areas,” Kinney said. “Appraisal gaps and escalation clauses have been helping big time. Unfortunately, you can’t ‘sleep on it.’”
Senior Business Writer Richard Mize has covered housing, construction, commercial real estate, and related topics for the newspaper and Oklahoman.com since 1999. Contact him at rmize@oklahoman.com.