So we have made it through another year: almost. It appears that here in the North East Region of the world, we may have some snow to welcome the new year in with. I have been scouring over article after article to see if I can get a pulse on the attitude and mindset of the first time home buyer. There have been many experts that seem to think that millennials are having a hard time adjusting to the slight uptick in the interest rates. It is hard for me to wrap my own mind around this as I processed mortgages twenty years ago when the interest rates were hovering around 12% and a great ARM program was priced out at 7%. But then it hit me…..while I was busy making loans for qualified buyers, these folks were just going into about fifth grade and interest rates were not something they understood, paid attention to or even knew existed. I had that a-ha moment and suddenly realized that I too would be feeling a little unnerved if my whole life after college had been based on a- world where 4% interest rates were actually high to most.
Okay, with that said, I can take a step back and understand why a slight uptick in rates and the news of more to come might be scaring those would-be home buyers. Suddenly they have lost .50 in buying power. It will take a little while for these conservative folks to understand that rates have been at an artificially low price point for years. With the increase in interest rates will come an increase in their 401k plan growth as well as interest on any money they have invested or saved. This just doesn’t seem to be enough to push these buyers out into the buying phase again. We all must remember that most millennials have had someone in their family lose their home, their job or their entire life savings due to the housing crisis and they are more afraid than my generation to jump into the unknown. Technology makes the world that we live in, a very controlled place. Information and the unknown can be known within seconds with our smart- phones. The future….not so much. So who could blame them for being a little gun-shy when they hear that interest rates are going up and they are already facing a housing supply shortage which has bolstered prices up to 10% over the last year.
It is going to take a positive attitude, the proper pricing and some real information to get these first-time homebuyers out there making offers. It is also going to take a little help from the sellers who need to face that the rise of pricing has, in my humble opinion, reached the bubble maxima. In other words, ask for much more and your entire exit strategy of your home is going to burst like a huge bazooka bubble!
My advice to the millennials and those who have not bought a home in over ten years: take stock in your job, take stock in financial ability and then go find a house that is going to build you equity and reduce your tax burden at the end of the year. There is no time like the present. Rates are going to increase more and prices will take many months to adjust downward. Educate yourself, check lenders, pick the best realtor possible and put your fears aside and instead, utilize good common sense in the home buying process.