Entry-level buyers hurt by lack of affordability 

Greg Bardell knows firsthand how hard it is for homebuyers right now. 

The broker and owner of Lancaster-based Realty One Group Unlimited said one agent had seven buyers make seven offers on houses within a few days – and everyone was turned down. 

The situation is especially tough for first-time purchasers, who often can’t compete with experienced buyers able to spend more on a house or pay in cash. 

The National Association of Realtors’ recent report, “The Double Trouble of the Housing Market,” illustrates how record-high home prices and record-low inventory are making it more difficult for Americans to achieve the dream of homeownership. 

Across the U.S., more than 400,000 fewer affordable homes are available for sale for households earning $75,000 to $100,000 when compared with the start of the pandemic – 245,300 in December 2021 versus 656,200 in December 2019. 

That’s just one affordable listing available for every 65 households in that income group, the report noted. 

While total home valuation nationwide is estimated to have risen by $8.1 trillion from the first quarter of 2020 through the end of 2021, this was not accompanied by a rise in the homeownership rate, which stayed at approximately 65%. 

The report also highlighted the “significant and persistent” racial homeownership gap. Since 2017, the annual homeownership rate has been more than 70% for white Americans but just slightly above 40% for Black Americans. 

Realtor.com Chief Economist Danielle Hale explained that the low inventory problem “is particularly acute for some racial and ethnic groups who have faced greater hurdles to homeownership … .” 

In the fourth quarter of 2021, NAR said in a separate release, the typical mortgage payment on a 10% down payment loan on a typical starter home valued at $307,400 jumped to $1,224, up $198 from a year ago. 

Entry-level buyers at a disadvantage 

“Certainly for first-time homebuyers, it’s really challenging right now,” Bardell said. 

For listings to attract 10 to 20 offers is still not uncommon, he said. And rising interest rates could further limit affordability for entry-level buyers, causing some to drop out of the market. 

Bardell recalled that 2015-16 was a pretty heavy buyer’s market, and sellers eventually stopped listing. 

Today, with it being a strong seller’s market, “we may see the same thing happen with buyers.” 

2022 president of the Lancaster County Association of Realtors, Bardell said the competition for some properties is so robust bidders are sweetening their offers by waiving home inspections. 

“We would never recommend” doing that, he said, because buyers could end up with a sudden problem – and expense – after they move in. 

The limited supply of houses coming on the market is also leading some bidders to make other compromises, such as spending more than they had originally budgeted. 

And if buyers decide they’d rather rent than purchase, that’s not an easy alternative either as rents are going through the roof, Bardell said. 

“There are not a lot of good options right now.” 

Finding a house was time-consuming for Allison Steffy and her fiancé, and one of the reasons is because they would not waive an inspection. 

That was non-negotiable for the first-time homebuyer couple, Steffy said. 

Although the process was frustrating at times, their patience eventually paid off. They “absolutely love” the detached, single-family they recently moved into, she said. 

It took 10 months to get a house, Steffy said, “and finally we have it – with an inspection.” 

Chip Trautman, an agent with Gateway Realty in Lancaster, said established buyers have an advantage in this market because they usually possess more money to put down. Some are also paying in cash, which is attractive to sellers. 

The hurdles are great for entry-level purchasers but “not insurmountable if they keep trying,” he said. 

It’s easy to get discouraged, however, Trautman said, and he’s seen investors drop out of this lopsided market. 

Homebuyers are adjusting their expectations. One example is a willingness to relocate to an area where competition for houses is less frenzied, he said. 

Elle Hale, an agent with Century 21 Core Partners in York, said probably 85% of her clients are entry-level purchasers. 

Most are in their 20s and 30s; some previously rented while others lived with family. “A lot are single women,” she said. 

In this tight inventory market, people won’t sell their house until they find a new place, said Hale, 2022 president of the Realtors Association of York & Adams Counties. 

“Everybody is waiting on each other,” she said. “It’s very frustrating.” 

New construction isn’t really an option either, Hale said, as those homes are too expensive for the entry-level segment. 

This is also a market where it’s hard to find sellers willing to offer closing-cost assistance to first-time buyers, she said, who may need that help. 

Hale advised new buyers to save as much as possible for a down payment. 

The clients she deals with are willing to compromise – such as looking at duplexes when they originally sought a single-family house. 

And they’re being patient, waiting until the spring when houses typically go on the market. 

But if they find something they like, they need to have their ducks in a row and move fast, Hale said. The message is “here’s what we have available: If it fits, it might be gone next day.” 

“Everything has to be lined up and ready to go,” she said, “to find the place you want.”