First, came a small condo or town home. Then, a few years later came a three-bedroom house.
Finally it was time for a move up to one of the four-bedroom, two-and-a-half bath homes that define so many neighborhoods in the northwest suburbs of Chicago.
That was the typical progression of buyers, remembers Kathy Jansen, brokerowner of RE/MAX Central, Roselle, Ill.
But not much about the housing market follows typical, old patterns anymore, and Jansen says she sees some first-time purchasers now leap-frogging right into a four-bedroom “forever” house.
“Right now, prices are still fairly low,” Jansen says. “And interest rates are also very low. People are saying, ‘Maybe all I have to do is pay about $15,000 more [in price] and I can get that long-term home.’”
Fewer first-timers
Interest rates are historically low, and in many markets prices are still below the boom-year levels. But fewer first-time purchasers are able to buy, often held back by the tighter credit standards adopted since the financial crisis, explains Jessica Lautz, manager of consumer survey research for the National Association of Realtors.
“We are getting back to the long-term average of first-timers representing about 40 percent of purchases,” Lautz says, but notes that many more first-timers would probably be buying if they could.
The lion’s share of first-time buyers are relatively young, members of Generation X, Generation Y (also known as Millennials), Lautz says.
NAR research underscores a trend of first-timers buying homes for the long term. “When we asked buyers who were ages 33 to 47 how long they expected to be in their home, the average was 20 years.
Younger buyers, age 32 and under, indicated a shorter expected tenure of 10 years, but that’s still a big stretch from traditional expectations, Lautz adds. Fiscally conservative? Danny Dietl, owner of Minneapolisarea iMetro Property, reports another departure from traditional real estate thinking: Some buyers view paying more for a home as less risky financially than buying a less expensive place that they would want to sell in a few years.
If the homeowners decide to sell a short time after purchasing the property, they could lose money due to commissions and moving costs, he explains.
In other words, they would rather pay more for a home in which they can stay longer.
Justin Udy of Century 21 Everest Realty Group, Midvale, Utah, adds, “They are getting into a good neighborhood that they won’t have to move from or they could sell easily if they had to sell.”
Still, adds Dietl, “Buyers are definitely concerned about not over-paying.”
Forward thinking
Indeed, first-time “forever” buyers are concerned about the expenses of owning, and agents should help prepare them — finding out what to expect in utility bills, lawn maintenance and other costs, Jansen says.
“These buyers also like to have a home warranty paid for by the sellers, whereby the appliances and systems are covered for a year, with the buyers only having to pay $50 or $100 for a service call,” Jansen says.
Buyers must also grapple with the personal question of how they envision themselves living years into the future. “I’ve seen people who don’t even have the kids yet asking about the high school,” Dietl says.
Many of the first-timers buying a longterm residence know the area well, agents say.
Buyers Joe and Stacey Saxton, for instance, grew up in towns nearby their current residence in Huntley, Ill. “We got a home that we fell in love with,” Joe says. “It had been a foreclosure that the bank refurbished. But we plan on making our own improvements in the years ahead.”
© CTW Features