Ryan Gable, Founder and CEO of StartingPoint Realty, remembers when a majority of first-time buyers wanted modest, reasonably-priced starter homes. Buyers saw their first home as a “stepping stone,” a way to build equity and eventually trade up to a larger or newer home.
These days, this scenario has flipped as buyers want their first home to be their forever home. “I’m seeing first-time buyers purchase four and five-bedroom homes for two people,” says Gable. “Most will pay a premium for a large house with a yard in a popular neighborhood, without considering an entry-level home.”
Even before the pandemic, first-time buyers developed a preference for like-new homes that didn’t need any work. Millennial-generation buyers entered the housing market later than their Gen-X and Boomer cohorts, and they entered it with higher expectations, perhaps due to influences in social media and HGTV.
Gable explains that millennial buyers were also very prepared for the market, which gave them an advantage. “By the time they were looking for their first home, millennial buyers had savings for a down payment, a strong credit score and a solid work history. With low interest rates on their side, they qualified for higher price ranges.”
But it was the pandemic that truly changed the mindset of first-time buyers, and the new psychology may endure as long as COVID-19 remains a fact of life. “Buyers want a home that keeps them ready for anything,” Gable says. “They want home offices, study areas and storage space. They want yards and distance from the house next door. They want it all in their first home, because they intend to stay put for a long time.”
It’s a tall order to find properties that fit the bill, especially when single-family home listings are scarce. “Condominiums and townhomes used to be attractive to first-time buyers,” Gable recalls. “Attached homes give you the benefits of home ownership with a low-maintenance lifestyle. Unfortunately, the pandemic changed how buyers look at these. They don’t want their neighbors that close.”
For all these reasons, first-time buyers are stretching into ever-higher price ranges in the Chicago suburbs, purchasing single-family homes from $500,000 to $700,000. The market is competitive at these levels because the inventory of available homes remains low.
“We may be seeing the consequence of the “forever home” mindset,” says Gable. “Homeowners who bought their properties years ago and skipped the entry-level home have little incentive to move. So with the influx of first time buyers entering this price point especially in the suburbs, it’s a battle out there. And as mortgage rates rise, these homeowners could become more entrenched.”
Gable offers this advice for first-time buyers today. “Rates are changing and it could affect your purchase power. Stay in contact with your loan officer and keep your pre-approval current. When it comes to your home search, decide your main priorities and know where you can compromise. Be willing to look at homes with those compromises in mind.”
Since 2004, StartingPoint Realty has offered free first-time home buying seminars and comprehensive guidance throughout the home buying process. StartingPoint Realty is a recipient of the 2021 Torch Award from the Better Business Bureau of Chicago. For more information about StartingPoint Realty, call 847-348-1154, or visit the website at www.startingpointrealty.com.
