Tips for First Home Buyers
It is said that the proportion of first home buyers among all house trade buyers in 2022 fell below 30%. For reference, the average from 2011 to 2022 was 40%.
Rising house prices, declining supply, and high interest rates are fueling this phenomenon. In this situation, I have brought information that may be of some help to first home buyers.
First, the biggest reason first home buyers can't buy a house is the burden of down payments. Interest rates have risen, and house prices have risen, so in order to buy a house you like, of course, the monthly mortgage payment would have to be much higher than the previous year or two years ago. The best way to reduce this payment would be to increase the amount of down payment. In other words, down payments can be more burdensome than before.
It's not for everyone, but you can find out about first home buyer programs and reduce the burden of down payment through them. Almost every municipality has such a program. In the case of Illinois, the IHDA program is representative. An easy way to find out is to go to Down Payment Resource (downpaymentresource.com), enter your situation, and it will tell you a list of available programs.
The second is that 'market conditions will get worse for buyers'.
As mentioned at the outset, the proportion of first home buyers out of all home buyers has decreased. But, as I've said many times, and as you can tell by just doing a Google search, the average age of first home buyers in the US is 32 to 33 years old. And these are the Millennial generation, which outnumber baby boomers. In other words, under normal circumstances, the ratio of first home buyers should be much higher than the usual 40%. However, the story of less than 40%, and the story that the ratio of first home buyers is less than 30% in the current real estate market, where the transaction volume is lower than usual, suggests that a much larger number of millennials are unable or unwilling to buy a house than expected. This is the story of buying.
Of course, there will be millennials who never buy a house for the rest of their lives. However, the day will come when the majority of millennials who haven't bought their current home will eventually buy one. And, there will surely come a time when the existing demand that is generally formed every year and the demand of these millennials overlap in the market.
As we all know, price is formed when supply and demand meet. What if demand increases in the current situation, where there is no way to drastically increase supply? And looking at the current situation, it is obvious whether demand will increase or decrease.
Third, don't insist on a private house, but also look for a condo or townhome. Of course, I tell my clients to buy a private house for the future. Because the biggest reason the supply of real estate is getting slower is because there is no land. Owning a parcel is therefore a great investment later on.
However, private homes are taxed and expensive to purchase. Therefore, it is not a bad idea to start with a small property that is less burdensome. In normal cases, the HOA also handles external management, so it can be more advantageous for inexperienced first home buyers.
Today, we shared some helpful information for first home buyers. If you have any questions about the contents of the article, please feel free to contact us. See you next time with a helpful article.