Tough housing market attracts childless and higher-income buyers: NPR

Prospective homebuyers face rising prices and high interest rates, but some are finding a way to make it work.

Frederick J. Brown/AFP via Getty Images

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Frederick J. Brown/AFP via Getty Images

Prospective homebuyers face rising prices and high interest rates, but some are finding a way to make it work.

Frederick J. Brown/AFP via Getty Images

Anyone shopping for a home right now has to deal with the double whammy of rising prices and high interest rates. To make matters worse, there aren’t a lot of homes on the market to choose from.

A study by mortgage giant Fannie Mae found that 85% of Americans believe this is a bad time to buy a home.

However, some people take the initiative. First-time buyers accounted for nearly a third of home sales during the 12 months ending in June, according to an annual report from the National Association of Realtors. A record 70% of all buyers did not have children under 18 living in the home.

Lance Zaldivar bought his first home over the summer, shortly after he got out of the Marine Corps. He raised money for the down payment during his recent deployment to Kosovo. His fiancée, Yasmin Benitez, also had some savings from her job as a nurse.

“My fiancée is much more picky than I am, and at this point now I’m glad she was,” Zaldivar says. “She was looking for a little bit of a yard. A little more space inside the house. A place where we could raise a family.”

Paying up front to secure a lower mortgage rate

The couple found a three-bedroom home in Montgomery County, Texas, north of Houston, for $245,000, well below the national average.

Their mortgage rate would be 6.25%, but they paid extra money down payment to get a lower rate for the first two years while Zaldivar finishes his bachelor’s degree.

“I was very happy about it,” Zaldivar says. “That eased my anxiety, compared to some of the other interest rates I’ve seen.”

Average mortgage rates have climbed higher in the months since Zaldivar’s purchase, approaching 8% this fall before stabilizing back to 7.5% last week, according to Freddie Mac.

Sellers are desperately clinging to their low-priced homes

High interest rates have put homes out of reach for many potential buyers. They also discouraged people who already owned homes from selling and giving up their cheap loans. This is a big reason why there aren’t many “for sale” signs right now.

Christina Dunlap says there wasn’t much to choose from when she and her husband started house hunting this year. But after three years of renting in Nashville, the couple was determined to buy a place.

“We basically calculated how much we spent on rent over three years, and I thought that number was a lot more alarming than interest rates right now,” she says.

Dunlap works as a freelance marketer and her husband, Eric, works as a construction manager. They considered purchasing a fixer upper, but decided that was more work than they wanted. Instead, they chose a newly built home near Springfield, about 25 minutes north of Nashville.

“The whole neighborhood is still under construction right now. We don’t even have paved roads right now,” says Christina Dunlap.

New homes account for a larger share of sales

According to the brokers’ report, about 13% of homes sold last year were newly built, compared to 12% the previous year.

Like many successful buyers, Dunlap made trade-offs, moving away from downtown and giving up the extra room she had hoped for. She’s already got the open floor plan and two-car garage, plus a yard for her dog, Cujo.

“The yard was essential,” Dunlap says. “When he gets — I call them the zombies — when he gets those twice a day, we send him out there and let him do it all.”

The purchase price was just under $350,000, so the Dunlaps needed about $30,000 to cover the 6% down payment and closing costs.

The down payment is the hard part and average buyers’ income is at a record high

According to a Realtors report, getting a down payment is the biggest challenge for many first-time buyers, especially those struggling with high rents and student loans.

The median income for all homebuyers hit a record high: $107,000. This highlights the challenges that middle-income earners face in purchasing a home.

“The down payment, finding the right home — the inventory is still incredibly tight — we know they’re having a hard time, especially finding an affordable property,” says Jessica Lautz, deputy chief economist for the Association of Realtors. “But these homebuyers somehow succeed and get there.”

Lance Zaldivar and his fiancée moved into their new home in June and wasted no time unpacking. While the average buyer plans to stay in a home for 15 years, Zaldivar plans to keep his home longer.

“When we have family, grandchildren, great grandchildren, they can always come to our house, and it will be home to the Zaldivar family,” he says.