You
may have heard the new term "Gen Rent,” referring to would-be buyers in
their 20s and 30s who have been priced out of the housing market. While
this age group is still forming households and would prefer to buy, the lack of
supply is preventing them from being able to purchase. That shortage of
inventory along with rising interest rates, makes it harder to qualify for a
loan.
Another
challenge today for the first time homebuyer is the emergence of cash buyers.
Cash buyers who opt to pay cash instead of getting a loan, are snatching
up the best buys on the market and the buyer who requires financing cannot
compete.
First-time
buyers will be challenged even further when the Fed decides to stop buying
bonds in order to keep rates artificially low. Federal Reserve Chairman Ben
Bernanke has said that if the economy keeps growing and unemployment falls, the
Fed will begin “tapering” its bond purchases this year, and could wrap them up
altogether next year.
In
the meanwhile, home prices continue to gradually rise. According to the chief
economist of the California Association of Realtors, Leslie Appleton-Young, the
median home price will increase from $319,300 in 2012 to $354,800 in 2013 (an
11.1 percent increase).
My
advice to first time homebuyers is to save as much cash for your down payment
as you can. Seller's feel more secure when the buyer is coming in with
more cash down. Don't give up. You may have to make offers on
several homes before you find a seller who is willing to work with you instead
of a cash buyer. The good news is that this does still happen.
Stay
in close touch with your lender to be sure that you still qualify because of
the rise in interest rates. Your payment could be affected substantially
from what you thought it would be when you first started looking. And remember,
it is not always the best answer to get the highest loan you can qualify for. Be
sure to allow for and set aside emergency funds in case you need them!
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