Your Mortgage: Tuck your wrists, kid — millennial homebuyers and today’s real estate market

Brett Mundinger. Photo credit Fountain Mortgage.

By Brett Mundinger, Fountain Mortgage Marketing Coordinator

As a millennial homebuyer, the process of finding a home to buy in today’s market reminds me a lot of the time I shattered my wrist when I was twelve. It was summer break, and my mom and I had just arrived back home from picking my brother up from band camp at his high school. Because I clearly had no idea what it was, the concept of band camp was super cool to me at the time. You’re in a band AND you’re camping?! Wow. My brother was way cooler than me, and I had to catch back up! While he was away at band camp, I had been- unbeknownst to my parents- testing the limits of a mini trampoline and the adjustable basketball goal in our driveway. If you’ve raised boys, you’ve probably already connected the dots and know where this bad idea train is headed. Several days spent perfecting my best Jordan dunks in the driveway and I finally felt ready to one-up my brother as we arrived home. I set the goal to 10 feet, grabbed my basketball, and yelled “watch this!”, taking off with a running start and the certainty that doing something really cool gives you.

I won’t break down the physics, but let’s just say things went upside-down at the top of my dunk and that the wrist is NOT the ligament you should select to break a head-first fall. One shattered wrist, a surgery, and four pins later, my future NBA career was cut short and the mini-trampoline set out at the curb for Monday’s trash collect. I learned an…impactful (see what I did there?) lesson that day, however, and it’s stuck with me since. Don’t do something just because it feels great at the time and seems awesome, else you risk being upside down and hurting yourself long-term. My three-month house hunt has me reflecting on this lesson a lot, and I think a lot of first-time, millennial homebuyers are in a similar situation. Still confused? Let me explain.

I’ve written before about why — in my opinion — millennial homebuyers have such a hard time making first home purchases when they could otherwise afford to, and current real estate market conditions have only compounded those same issues. Bringing back some middle-school econ 101 teachings, today’s market is, at its core, a basic supply versus demand problem, and people aren’t moving enough to sustain rising demand. Apartment living, city-dwelling millennials like myself are pining for first homes of their own which don’t exist in high enough quantities, and some months have seen 40% reductions of housing inventory available for purchase. My perspective is limited to those buying first homes within the hottest, most competitive sector- the three-bed, 1.5+ bath home market- but a variety of hurdles for buyers exist now which didn’t necessarily months ago.

If you’re looking for a nice starter home in good condition, it’s not uncommon to see upwards of 10+ offers which may go 15-30k over the list price depending upon how ready the home is condition-wise. A pile of offers may accrue within the first 24 hours of a home being on the market, and not all the homes are in the perfect, turn-key conditions you might expect with aggressive offers. They’re sometimes homes that are in decent to good condition and might need some sort of work done right upon move-in. Oh, and that tour you scheduled? Get used to it being a fifteen-minute window for you to see all you need. The next two home seekers are sitting in their car waiting on you and the people before you are coordinating who walks through the house and who walks through the backyard simultaneously. Within that stack of offers mentioned earlier, a buyer’s most competitive position is the one asking for nothing at all. While this could be true in any market, buyers are doing things like waiving all inspections and offering to buy as-is to avoid losing out on houses. I’ve joked that I can’t purchase my house without at least confirming if it’s slowly cracking in half or not, and there’s a little nugget of truth there. Bottom line- if you’re a millennial and not prepared to pull the trigger immediately on a home in a specific way, you’re liable to lose out in today’s market.

I know that may seem like a pessimistic outlook on buying a first home, but I can assure you it’s something to consider anyways. I’m not arguing that anyone should stop your housing search or that my situation applies to all people, but stopping to take a pulse-check of any decision every now and then can be good for the soul. I’ve personally struggled with being able to evaluate if my purchase will turn upside down in value within a year or two once supply picks up and there’s more competition. I’m also not married, on a single income, and have the flexibility of going month-to-month on a lease as long as I want, so the mileage you’ll get from my advice may vary if your situation is different. If you decide to keep searching, however, here are five things you can do to give yourself a competitive edge:

  • First and foremost, obtain a pre-approval letter from a reliable lender so you have the ability to quickly execute an offer with weight behind it.
  • Find a realtor with a track record (verifiable with reviews) of being able to quickly book and look. I was able to select a realtor who has a team of highly qualified individuals look at properties with me, and having that flexibility has been awesome.
  • Third, I would recommend asking yourself if you’re willing to pay any possible difference if an appraisal comes back lower than your offer. Decide that before you put in an offer.
  • Make a list of non-negotiables and do your research on how serious an issue any given repair could be. Will the property need a new roof, HVAC, sewer line, foundation repair, siding, or anything else expensive you don’t want to tackle? Know before you go what you’re willing to take on if the house is definitely the perfect one. A seller’s market means less incentive to do costly repairs before listing a home.
  • Be willing to wait. It’s okay to want a house right now and not being able to buy one. A goal delayed is still a goal achieved. Remember that.

Above all else, I think it’s important to set expectations for yourself and constantly be evaluating your own thinking. Like my dunking, It’s possible to feel really good about your chances and still end up upside down in a bad situation long-term as a buyer. Likewise- and I want to emphasize this one- nobody is watching to see what you do. Nobody worthwhile in your life is going to be that upset by you waiting to buy a home. Interest rates are at an all-time low, but that doesn’t make it a perfect situation for every person. Some days you’ll feel like your housing hunt is going well and some days you won’t, and that’s okay. We’re here to help you when you’re ready and give you the guidance you need to make the best choice for you. Until then, keep with it!

Oh, and stay away from those mini trampolines!