Just wanted to start off by saying first time homebuyers definitely have it worse, between the rapid appreciation of the past five years and interest rates that are significantly higher than they were.
My wife and I are currently in a 1,000 sf starter home in a nice area with a garage and finished basement that I bought almost ten years ago. I’ve done a lot of work to it and it’s nicely updated and in great shape, but we have a little one now (and are planning for more) and would like a little more space. We’d also like to be a little closer to family, we aren’t terribly far but it would be nice to be closer for childcare, visits and other support. I fully recognize that we are fortunate to have a home and don’t *need* this, but it would be nice.
We are very fortunate that we have significant equity in this house (it’s appreciated and I refi’d down to a 15-year when rates were ultra low) and have saved a significant amount of cash to put down on top of that. So we did not think it would be terribly difficult to find something we’d like when our new budget is almost double what our current home is anticipated to sell for.
We were wrong. The inventory in both our area and the ones we’re looking (Detroit Suburbs) is still well below historical levels. So it’s hard finding anything to look at. On top of that, a lot of the stuff that *does* come to market is garbage. It seems like it’s all either new builds that are absurdly out of our price range ($700K+) or existing homes that need a TON of work. Homes that either haven’t been updated at all in decades or have been updated very shoddily. Some of these homes aren’t just dated, they’re downright gross and decrepit.
We don’t need something completely turnkey. And it would be fine if these homes were priced accordingly… but they’re not. Everyone demanding top dollar for their turds, thinking they’re sitting on a pot of gold. These houses mostly sit, but sellers refuse to negotiate.
And we really aren’t getting much more for spending nearly double. More square footage, but not significantly more. A larger yard, but not acreage or anything like that. Homes in our new area sell comparably for what they do in our existing area, so it’s not like we’re moving to a much more upscale area. I just feel very discouraged.
We went into this knowing rates are higher. And it’s not like we couldn’t just settle and buy something. But it’s hard to stomach paying $1,000-$1,200 more per month (almost double our current payment) on a 30 year rather than 15 year, for a marginally larger house and yard that needs a ton of work. It just seems like an extremely poor value proposition and I’m starting to understand why more sellers are sitting tight and not listing their homes. Anyone else going through this? At this point we’re considering just sitting tight another few years, saving more money and only making a move when we can actually find something we *really* like.
Anyone else getting discouraged as a “move up” buyer?
byu/midwestern2afault inRealEstate
Posted by midwestern2afault
25 Comments
You’re selling your home for more , other homes appreciated the same.
The housing market overall is in a weird place. Everyone that brought in the last 10-15 years has rates below 3%, even with the equity in their home selling and getting something new means 5.5% rate at best. A lot of these people are locked in because that change in rate is huge, and rates probably won’t go down any time soon. Couple that rate with the larger prices and current owners aren’t really looking to sell.
You seem to be in the same spot. The housing market isn’t collapsing like 2008, it’s coming to grinding stop. No sellers means buyers are locked out, as rates keep current owners locked in.
A whole lot of people in “starter” homes are in the same boat as you.
It seems you have no pressing need to upgrade.
There are so many more layers to this too. Luckily you have a house you bought 10 years ago that also appreciated that will help mitigate some of this for you. It really does get insane for first time homebuyers especially if they are trying to buy a home while also paying for any sort of student loans. I’m finding that some friends with expanding families are finding it more financially bearable for them to add onto their house rather than buying a new, but larger home.
Still pretty early in the season too. A lot of people dont start listing until May
What makes you think other buyers wouldn’t think the same way when they try to buy your house?
Ur home appreciated, and everyone else did too. The only winner here really is the Bank.
Grocery, cars, utility bills, Property tax, and home price all got inflated, the only thing that stayed the same was our wage, and that’s the reality most of us come to terms with.
We either just hunker down and make due with what we have now thru the winter, or try to make more money in order to upgrade.
No, I am not discouraged, it is motivated to earn more money.
Man, we would love to downsize and can’t justify it. We can get something for half the square footage of the house we bought in 2021 for more than what we paid in 2021.
Yes our house appreciated, but we would end up paying more in mortgage with the interest rate than our current house.
I’ll say you’re not the only one feeling this way. It’s hard to fathom a mortgage that is 3x-4x what you’re paying.
I’m afraid to lose out on the equity we currently have if we wait longer to sell.
you’re not crazy, the move up value just isn’t there right now with rates and inventory. honestly waiting and saving more is a pretty reasonable move until something actually feels worth it.
Patience in all things.
The market is definitely about to open up. All the boomers will be dying off in the next 10 years.
We are a first-time buyer family. Hoped to spend somewhere in the $800’s on a nice resale that might’ve needed cosmetic upgrades but otherwise had good bones. Everything we’d seen at that price in our market also either included $600+/mo HOA fees, hadn’t been upgraded in decades, or had been bought within the past three years with some baked in appreciation for the seller helping to recoup transaction costs. The market has been sideways otherwise. So, we ended up going with a new build because they offered a 3% credit towards a rate buy-down for $970. Out of pocket was a bit more than we would’ve wanted per month, but it comes with a warranty so we are hoping not to have any mystery surprises in the first year or so. Plus, the mortgage interest deduction is going to amount to around double the income tax refund, so it’s helping offset some of the cost.
We are in one of the highest cost of living areas in the country and non-conforming mortgage limits are in the $1.2MM+ range.
Moral of the story, I, of all people was never going to even consider a new build. Turns out, it was the only reasonably priced SFH in the market. We had seen several others in the $900’s the same day that were resales and it gave a huge amount of perspective. There’s too much appreciation in the resale market right now (at least in my area). See if your builders are doing promos that can help with monthly payments. 🙂
Does the lot size permit an addition?
Welcome to the post-Covid market. This is not new information for anyone that’s been looking in the past few years. And waiting is not going to help one bit.
I think you’re in a lot of good company. We definitely can’t move up. We can’t afford the price leap it would take, especially with our not-enough-salary paychecks that haven’t risen to the same buying power, and interest rates where they are.
So we are very much stuck.
The only people we see moving into or on from houses in our neighborhood are boomers who can outright afford to buy in cash after selling a place they’ve owned since 1987 & made at least 500k on.
It’s tough I’m a FTHB , with a high income and it’s tough to think we are looking at paying 4700 a month.
The person that bought the home bought it for 180K and we’d be paying 650K. The payment difference is insane. It fits in our budget… but is it worth it? idk
I was in this exact situation in 2004. We had bought in 2001. We ended up selling in 2004 for almost double what we paid in 2001 with a 15X return on our down payment. Rented for three years and then bought in mid-2008 when prices were coming down. Didn’t buy at the exact bottom in 2008, but found the near-perfect house which I’m sitting in right now.
Bottom line suggestion – sell the start home and rent something that fits your life and budget until pricing / availability gets a little better. You can lock in those tax-free gains in the meantime.
We’ve been going through this now. Sold our (frankly, very nice) starter home, which was fully renovated down to the studs in 2014. Priced it aggressively, sold in 3.5 days, and pocketed a bunch of equity.
Absolute turds on acreages are listing for $1m+ in our area. After being ‘dead set’ on 3 other properties, we finally landed on the right one. Came in under budget, completely turn key, that had been sitting since November. Two price drops since, with our offer being sent over the morning of the second price drop.
People are reaching right now for every penny possible. Those properties are the ones that will sit for months. Your job will be to find the diamonds in the rough and submit realistic offers. Something will stick eventually.
It was just so stressful to have sold our home and not have the next one lined up. We had a rental in place, just in case we didn’t find anything. Tough to do all this with a little one.
You’ll find your home!
Hey it could be worse. Just imagine if you weren’t on the property ladder before 2020 and are looking to buy for the first time. All most of us can do is to count our blessings, hunker down, and try to wait it out as best we can.
Also in the Detroit Metro area. Have been looking for 3 years. Have made (and lost) at least 9 offers….but we lost count. I feel you.
Supply is so low that anything hitting market is going for crazy prices. By me, a 3 to 4 bedroom with 2+ baths would list for at least $730k to $750k, and would probably get pushed up to $800k through multiple offers. That’s likely $250k more than the house would have sold for 5 years ago, and even up to $150k more than what it would have sold for 3 years ago.
Add into that much higher interest rates, and I (and most of us) would be looking at tripling the mortgage payment to upgrade (and that’s with way more than 20% down even).
Most are finding it’s not worth it, which in turn is why no stater homes are for sale either. No one is upgrading, and the entire market right more feels like people that sell because they’re relocating and people buying for the same reason and are stuck having to play the game.
You’re in a good position and can just wait until the right house comes along. I think it took us more than 15 months to find the right house in a very hot market with little inventory.
The nice thing about your situation is that you can afford to be patient and wait it out for the house you love. 3 people in a 1000 sqft 3 BR home is totally doable. It might not be ideal, but until it becomes untenable, there is no reason to overspend on something you don’t feel like is worth the money.
My wife and I are in a similar position. We bought in 22 right at the peak of home prices and right before interest rates went back above 4 again. We 100% overpaid for our home, but there were some significant factors that made it so we HAD to buy at that time. Overpaying wasn’t a problem because we bought in an area that has affordable beautiful old homes. Our payment stayed low and we have had the money to upgrade the house a little at a time on the inside and outside as we see fit. Now we both would prefer to be in another area, but we’re not in a rush at all. We casually look on the MLS and we casually tour a house or neighborhood every now and then, but until we see a home we flat out love at a price we find acceptable, we’re good to ride things out in our beautiful little home.
Hold the line and be patient. There will always be more houses to buy.
this is something that a lot of my friends who bought pre/during COVID seem to be facing. they call it their “golden handcuffs”, in that they were privileged enough to get their foot in the door pre-everything getting way more expensive (house prices included), bought the traditional “starter home” but now are stuck in too small a house for their needs, with an inability to sell for enough and afford a mortgage on a place with more room.
unfortunately most of them seem like they’re just planning to stay point and figure out how to live in too small a space, unless prices go down enough they can afford to upgrade.
What about adding an extension to your current home instead?