Is the time right for first-time homebuyers? |
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This is an especially bad situation for people in their 20s and 30s. Because they are just starting out in their careers, young adults relocate often in search of better jobs. Their growing families mean that they will, in all likelihood, be moving out of their first homes quickly. In a situation where a homeowner has negative equity, getting out of a home is extremely difficult.
The owner must be able to pay the mortgage off at the time of sale. If the house can't be sold for at least what is owed, homeowners are stuck.
"First-time homebuyers tend to move on fairly quickly," says Holden Lewis, Bankrate.com's mortgage expert. "Buying at a time like this, they run the risk of being immobile."
Are you a first-time homebuyer eager to get into the market? Here are steps to take to help you decide whether you're ready to take the plunge.
Friendly neighborhoods for buyers
Still, in some markets, where prices didn't skyrocket as much as in former boom areas like Florida and California, the outlook for prospective first-time homebuyers is much better. Some markets in Texas, Utah, North Carolina and other states have actually seen modest growth and may offer less risk for first-time buyers.
Dawn and Michael Kessay purchased their first home in Seattle recently and enjoyed the best of both worlds -- a good selection and relatively risk-free pricing. Their agent, Sheryl McLaren, believes that despite the grim national news, this is still a good market for first-time buyers with strong credit.
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| Should you rent or buy? |
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"Yes, the market's tightened up, and the buyers that are out there are very qualified," says McLaren, who is an agent with Seattle's Zip Realty. "You have to be a strong buyer, but you'll have more negotiating power."
"We'd been thinking about buying for years, and hadn't because we'd been hearing all these bad things about the market," says Dawn Kessay. "(Michael) thought we should go look. We did and it was the perfect time -- it's definitely a buyer's market."
The couple searched for only two weeks before finding a house that gave them room to grow and fit their price range. "I think we got a bargain," says Dawn Kessay. "They had already lowered the price, and we got it lowered even further, and they paid closing costs and for a couple of repairs."
The Kessays have no plans to move in the near future, so they should be able to ride out any downward turn in prices in the Seattle market. For young buyers like the Kessays, with good credit, a down payment and the intention to stay put, the time might just be right.
Still, for most millennial homebuyers, the risks outweigh the benefits, especially with a glut of affordable rental units coming available as desperate sellers try to rent out units that are just not selling in the current markets. It may be best to spend most of 2008 kicking back, calling your landlord when your appliances break down and watching the real estate market for signs of a recovery.
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