What First-Time Homebuyers Need to Know About the Spring 2019 Real Estate Market

If there’s one thing that seems to trend throughout the country’s real estate market for spring, it’s an all-around cooling. America’s hottest markets are seeing a deceleration of what have up until recently been eye-watering appreciation rates. According to the National Association of Realtors (NAR), home prices for the next 12 months are expected to rise only 2 percent—a slowdown compared to 2018’s 4.8 percent. Additionally, inventory is growing: NAR reports that nationally, there is a 6 percent increase in available properties on the market.

While this may all sound like great news to first-time homebuyers who have previously been priced out of the market, there’s a caveat: All of this is being driven not by an influx of affordable homes, but an oversupply of luxury homes going unsold. Last year, the inventory of homes priced over $750,000 grew 11 percent, while the number of homes under $200,000 shrank by 7 percent.

But it’s not all-around gloom for first-time homebuyers. For certain individuals, there will be increased finance and investment opportunities—you just need to know where to look. Here’s what the experts say every first-time homebuyer should know about the real estate market this spring:

All of the real estate professionals I spoke with noted that low mortgage rates are enticing many buyers to make the leap for the right home before the market changes again.

“I’ve seen a big jump in inquiries,” says Noemi Bitterman, real estate agent with Warburg Realty in New York City. “The rates situation is getting people to finally pull the trigger—$200-$300/month in a mortgage payment can make a big difference.”

Compass South Florida agent Jordan Kramer notes that many economic factors are finally allowing some first-time homebuyers to finally enter the market:

“Unemployment is low, interest rates are low, and wage growth is strong,” he says. “It creates the perfect storm (for many) to buy property and get the financing for it.”

This is especially important in markets like New York City, where once overpriced homes are finally stabilizing or facing price reductions.

“People are starting to realize that dropping prices won’t last forever,” Bitterman says. “Sellers are realizing that they have to lower (their asks) a bit and buyers are realizing that they can get in at a good price now.”

As noted above, luxury inventory is flooding markets like New York, New York; Denver, Colorado; San Jose, California; Seattle, Washington; and Miami, Florida. However, in these markets, lower end homes are still a rarity.

“We’ve definitely seen a tale of two cities in our condo vs. single family home markets,” Kramer says of Miami. The uneven market is being driven by an oversupply of luxury condos—many which are getting aggressive price cuts. However, limited inventory and competition for mid- and low-range home are still driving prices up. In December 2018, prices for homes in the $300,000-$600,000 range increased 9.4 percent year-over-year.

Though too much luxury seems to be the rule, there are some markets where its the exception: Lynchburg, Virginia; Watertown-Fort Drum, New York; Provo-Orem, Utah; and Colorado Springs, Colorado, are some of the markets being flooded with affordable options. In each market, there is more than 48 percent more homes on the market than in 2018, and the median price starts at just $159,950 in Watertown-Fort Drum.

Though prices in the Midwest are still inching up—but they’re still relatively low. Rob Maltby, sales associate at Dielmann Sotheby’s International in St. Louis, Missouri, says that young families remain attracted to the area for its low-median price point (around $250,000), even when the prices are rising quickly (Zillow forecasts a 4.6 percent increase by 2020).

“The market is still strong, but buyers are getting pickier about what they want. Location and amenities matter more and more and it’s been really interesting to see how the energy has shifted,” Maltby says.

Jon Tetrault, a director at the Nick Slocum Team in Rhode Island, says he’s noticed something similar in his market: New buyers are eager to purchase, but like in many places, there’s only a limited affordable inventory. Despite this, buyers are finding the market is less competitive than it was in the past:

“Buyers feel like they’re getting a bit of their power back,” he says. “They’re feeling like they have a bit of flexibility in negotiations.”

He notes, too, that he’s noticing that, instead of signing a year-long lease, many first-time homebuyers are transitioning to month-to-month renters as they wait for the right home. Overall, buyers are more likely to wait and find the best house rather than just the “good enough” home.

Though appreciation is largely stabilizing, prices still remain high and a large portion of Americans are shut out of their local market. Because of this, the housing market is softening overall as fewer people are buying homes. And because interest rates are low (which should be attractive to buyers), banks are eager to finance. However, the pool of traditionally “safe” applicants (those with high credit scores and high down payments) is smaller than banks would like it to be. Many lenders are now relaxing their approval requirements to making it overall easier to obtain a mortgage.

Loran Arvizu of The Agency in Los Angeles, California, notes that lending requirements are now more inclusive for the creative community (especially those self-employed). This is significant, because it traditionally has been notoriously hard for the self-employed to be approved for a mortgage. Overall, more buyers have more access to purchasing capital than before.

“Before, it was hard to prove you could afford a loan,” she says. “[Heading into spring], buyers will be more prepared with prequalified and statement-only loans [which prove income based on bank statements as income.]”

Will you be buying a home this spring? What concerns do you have as a first-time homebuyer?

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