First-time homebuyers are getting fed up with losing bidding wars—and many are taking steps to become more competitive in this cutthroat housing market, whatever it takes.
Instead of giving up, more aspiring homeowners, who have been steadily saving money during the COVID-19 pandemic, are willing to spend more on a home and offer more than the asking price in their quest to become homeowners, according to a recent Realtor.com® survey. (The survey of nearly 2,600 adults was taken between Sept. 23 and Oct. 1.)
“First-time homebuyers internalized how competitive the real estate market has been this year and have been willing to adjust their budgets, strategies, and expectations,” says George Ratiu, manager of economic research at Realtor.com. “Low mortgage interest rates have allowed first-time homebuyers to stretch their budgets. And many first-time homebuyers who have been able to work remotely have been able to save a little more for a down payment.”
Of the more than a quarter of would-be first-time buyers who haven’t closed on a home this year, nearly three-quarters plan to keep trying. More than 9 in 10 first-time buyers plan to offer more than 20% down, when possible, and check online listings daily to make themselves more competitive.
And yes, many are also willing to pay more to become homeowners.
The number of folks looking for homes in the $500,000 to $750,000 range more than doubled from 6% in the spring to 13% in the fall. Meanwhile, fewer folks were seeking properties priced below $350,000, dropping from 75% of first-time buyers to 62%.
Despite rapidly rising prices, nearly a third of these buyers are now willing to offer 30% over the list price of a home—compared with none in the spring when Realtor.com conducted a similar survey. Offering that much can add more than $110,000 to the price of the typical home.
“Many of these first-time homebuyers have gone through multiple failed bidding wars,” says Ratiu. “As a result, they’re willing to pay significantly over asking to win.”
As the pandemic drags on—and on—millennials are increasingly seeking out more flexible space that they can use for multiple purposes, such as finished basements, guestrooms, and guesthouses, which can pull double or even triple duty, according to the survey. With folks spending more time at home, buyers have been looking for homes with spaces for things like offices, gyms, and online learning if a child’s school goes remote.
However, nearly two years into the pandemic, they’re not as willing to relocate to get all of that extra space. About 47% planned to stay in their current towns and cities in the fall compared with 40% in the spring. Just 16% planned to move out of state.
“Most people who wanted to move have moved by now,” says Ratiu.
Many companies bringing workers back to the office, or planning to in the new year, could also deter some folks from uprooting. Plus, many farther-out and smaller cities became less affordable as the pandemic dragged on.
“For many people, the place where they’re living is attractive and suits their lifestyle,” says Ratiu.
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