What can first-time home buyers in Washington expect when getting into the local real estate market this year? Is it a good time to buy?
The recent months have seen the national economy quite volatile. During times of economic downturns, many of the greatest decisions in business history are made. were made in times of adversity. This goes for financial titans, and it goes for first-time home buyers. In fact, today’s real estate climate may provide new purchasers with some incentive to act now.
More Shoppers, Fewer Homes, More Opportunity
The recent health crisis seems to have had little effect on those in the market for a house. On the face of it, a contraction in the number of home listings would spell bad news for anyone looking to buy. After all, it just makes the local real estate market that much more competitive.
So, first-time buyers really need to up their game to have a chance at a successful bid. Here is their advantage: unlike many veterans, they have no property to unload in order to make the new deal work.
When a purchase transaction is contingent on a simultaneous sale to make the financing work, synchronizing the two can get very complicated. They must negotiate with those buying their own home and with the seller of the new home.
On the other hand, buyers of first homes have no such distraction and can focus solely on their bid and the new purchase itself. As long as they come with earnest money and sufficient equity, and approved financing, they can avoid those problems that can hamstring an otherwise competitive offer.
Rising Interest Rates
Since the Federal Reserve brought the benchmark rate to near-zero, mortgage interest rates fell to uncommonly low depths over the past couple of years, which was bad news for savers but good news to first-time homebuyers, most of whom have yet to establish significant savings.
Modest rates mean that monthly payments are relatively smaller. If the loan amount is high, the savings can be quite meaningful. A $400,000, 30-year fixed purchase loan in which the rate falls by three-quarters of a point can save borrowers $150 per month: that’s a week of groceries or a teeth cleaning or a desktop webcam.
However, rates are on the rise. In fact, they’re quite a bit higher today than they have been over the past few years. Earlier, experts predicted that the rate for a 30-year fixed-rate mortgage would reach 4% by the end of 2022. But as of April 2022, the rate is already at 5.11%.
More Convenience When Looking in WA
For the last 20 years, realtors have invested significant time and money into making their listings available online. This movement has evolved from a few photos posted on a website to very detailed webcam videos of each house. Now, a Tacoma-based couple can review a multitude of houses in Yakima without multiple two and a half-hour journeys to and from. Agents are stepping up their game in terms of updating their virtual tours and many are now in 3-D, and agents often answer questions remotely.
Of course, any prospective home buyer wants to see a property in person before putting down earnest money. Yet technology allows shoppers to narrow down their options considerably. This streamlines the whole process, which once ate up many weekends with exhausting house-to-house walkthroughs.
It also cuts down on real estate agents’ overhead, which can work to the advantage of savvy buyers who don’t mind negotiating agent fees. All in all, the speed, availability, and detail with which listings appear during this pandemic work together to the advantage of first-time home buyers in Washington.
Epidemiology and the Real Estate Market
The Seattle region was one of the first real estate markets in the country to bounce back following the recent health crisis. What followed was an inevitable spring back of the housing market.
What does this mean for the first-time home buyer? It could mean that time is of the essence. As noted above, real estate markets in this part of the country are vigorous even when times are tough. Those new to home buying will suddenly face many more rivals and a shrinking number of listings. If there is any takeaway from an improved public health outlook, it is a warning to avoid procrastination. A wide open field between you and your dream house can get crowded very quickly.
Right Place at the Right Time
One practice that has gained wide acceptance and use is the implementation of virtual open houses. While physical open houses are still a staple in the world of real estate, virtual open houses make things much more convenient, especially when it comes to weeding out the duds and focusing only on properties that capture a buyer’s attention.
First-time buyers can position themselves to capture their ideal home selection if they are prepared to do so. Preparation is the operative word.
Mortgage financing pre-approval is one way newbie buyers can get ready to pounce. This is a preliminary evaluation of credit, debt, revenue, and assets based on information from the loan application. It lets the borrower, and any other interested party, know how much money the lender would be willing to advance should the loan be approved.
For one thing, it re-directs borrowers to bid on only those houses they can afford. Secondly, it conveys to sellers that prospective buyers are in good financial shape to make an offer. In addition, a pre-approval affords the realtor confidence that he or she is not wasting time.
Another tool in preparing for a bid is to clarify your own goals and plans relative to a home purchase. Is this a “starter” house until more children arrive? How long do you plan to stay — i.e. is there a job involved that requires frequent relocation? Will you settle for a less than an ideal house because the rates are so low and you hate to miss an opportunity? In a way, this sort of self-assessment is as important as any other pre-offer consideration.
Talk to a Mortgage Pro
A conversation with a loan officer is the best first step to getting the proverbial ducks in a row. It demands no commitment and can help first timers figure out the best strategy for proceeding. It can also lead to a pre-approval. Before advancing in the direction of a sales contract, smart buyers need to know just how mortgage financing works.
Since 1992, Sammamish Mortgage has been helping people with mortgage programs. Sammamish is based in the Pacific Northwest and works with clients in Colorado, Idaho, Oregon, and Washington.
To get a rate quote, you can Contact Us. We are here for you and can sit down and explain the process. If you’d like, you can View Rates on our site. Or, if you’re ready, Apply Instantly or obtain a Rate Quote.