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‘They were snatched up in 12 hours’: First-time homebuyers face stiff
competition and high prices
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The Definitive Guide to Buying Your First Home


‘THEY WERE SNATCHED UP IN 12 HOURS’: FIRST-TIME HOMEBUYERS FACE STIFF
COMPETITION AND HIGH PRICES

Published Thu, Aug 26 202111:18 AM EDTUpdated Thu, Aug 26 202111:48 AM EDT
Alicia Adamczyk@AliciaAdamczyk
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Twenty/20

Before David Taylor, 38, could even finish touring homes he and his wife,
Destiny, 37, were interested in buying, other buyers would offer $20,000 or
$30,000 more than the listing price, in cash.

After months of getting beaten out before they could even bid, their agent clued
them in to a home in Christiansburg, Virginia, that had yet to be listed: It was
about $20,000 above their price range, would need some serious renovation work
and didn’t have a backyard like the Taylors wanted for their children to have
space to run around. But it had four bedrooms and was in a good school district.
Best of all, the couple was the first to learn of it.



The Taylors closed on their new home in early May for $242,000 and estimate
they’ve put in around $15,000 to $20,000 on new flooring and ceilings and
landscaping. Just a few years ago, the same house would have sold for around
$200,000, David estimates.

Their experience is more or less the norm for first-time homebuyers over the
past year and a half, as mortgage interest rates plummeted, demand soared and
prices skyrocketed during the coronavirus pandemic.

“If these houses were good, they were snatched up in 12 hours; if they were bad,
they were snatched up in 36 hours,” David says. “You’re on your phone all day
looking at Realtor.com, at Zillow, just waiting for something to pop up.”


WHY IT’S SO HARD TO BUY A HOME RIGHT NOW

First-time buyers always face an uphill battle, according to Nerdwallet’s recent
First-Time Home Buyer Metro Affordability Report: They typically cannot spend as
much as other buyers, and their credit histories aren’t as strong.

And like so many other problems, Covid-19 further complicated the process. With
no one leaving their homes, supply became even scarcer than it was, says Cory
Hopkins, senior managing editor of Zillow’s economic research team. That
coincided with more millennials reaching the point where buying a home was
financially feasible — and necessary for many with growing families — and
desiring more space while working from home.



Institutional investors are also swooping in again, with degrees more capital
than the average buyer, snapping up about 1 in 7 U.S. homes in the first quarter
of 2021, according to Redfin, a real estate brokerage.

Add all of that together, and the price of starter homes in the U.S. is growing
seven times faster than renter income, according to Zillow. It now takes
first-time homebuyers a year longer to save for a 20% down payment than it did
just five years ago.

When they do buy, many, like the Taylors, are making concessions. Not just on a
backyard but on things like having a home inspection, which could lead to more
costs down the line, Hopkins says.

“You shouldn’t necessarily have to be in that position,” Hopkins says.
“Homebuyers need to be patient. Wait for the right home to come on the market in
the right place for the right price.”

But, at least in the Taylors’ experience, first-time buyers don’t want to ask
sellers for anything or delay the process, lest they pick another bidder, David
says. And when it comes to sticking within a budget, David says potential buyers
can forget it.

“People will pay $60,000 or more above the list price without batting an eye,”
David says. “Sellers know they will sell their house and do nothing to make it
look appealing or updated.” In July, over 55% of homes sold went for more than
their asking price, according to Redfin.

But there is good news for those who are considering looking for a home soon.
The market has cooled off a bit and inventory is slowly increasing, though
prices remain high, Hopkins says. In the coming months, he expects prices to
grow at a slower rate than they have been over the past year and a half.

Despite the stress and headaches, the Taylors are happy in their new home. David
doesn’t regret the process.

“We were really lucky; we really were,” he says. “But I’m never buying a house
again.”

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