There are all kinds of numbers available for people to ponder as they set on the path to homeownership. Every month the National Association of Realtors® releases a home-purchase affordability report which provides the latest national facts and figures regarding qualifying income needed to buy a home, current average mortgage rate, median family income and qualifying income, and much more.
While certainly helpful, each buyer has their own numbers that will tell the tale about whether they can successfully close on a home. And while agents can paint a broad picture of what’s happening overall in their market, they must be prepared to take a deep dive into a client’s financial situation in order to provide precise advice on how sensible it would be to purchase what they are seeking.
RISMedia asked real estate professionals what’s happening affordability-wise in their markets.
For longtime agent Pam Rosser Thistle with Berkshire Hathaway HomeServices Fox & Roach, REALTORS® in Philadelphia, there has been a sea change regarding affordability and buyers.
“Most of my buyer business used to be young first-time buyers, but it’s harder for this demographic now,” she says. “Most need help from parents. Many are using PHFA (Pennsylvania Housing Finance Agency) loans, which offer a lower rate with some restrictions. There are fewer young buyers purchasing on their own now. When they do make it to the finish line, I cheer for them and help in every way.
“What I am seeing is older buyers and sellers, people who have worked for decades and owned homes before. Many have saved their cash and are using it to purchase real estate. The most common reason I am hearing from potential buyers as to why they are buying is to be close to grandchildren.”
Danielle Andrews, with Realty ONE Group Next Generation in Tallahassee, Florida, started her real estate career in Orlando, but Tallahassee’s affordability caught her attention.
“It’s what fueled my passion for helping people buy homes here in Tallahassee, and remains one of the most approachable markets in Florida,” she says. “Prices and rents have climbed, but compared to the state’s major metros, buyers still get more space, value and opportunity for long-term equity.
“For several years, Tallahassee faced a real inventory crunch, and that shortage definitely pushed prices up. Inventory is starting to rise now, which is a positive shift, but we’re still feeling the impact from those tight years.”
Andrews notes that several factors have combined to make affordability more challenging than it used to be, even in a market that historically offered great entry points for buyers. They include high insurance costs that add significantly to monthly payments, mortgage rates that have normalized and are no longer the ultra-low COVID-era rates, and construction and renovation costs that continue to climb, making even small projects more expensive.
Like other metros, Tallahassee’s high housing costs have caused people to move away from certain parts of the city.
“We’re definitely seeing people expand their search radius,” says Andrews. “As prices have risen in central Tallahassee and areas near the universities, many buyers are looking toward the suburbs where their money goes further. People aren’t fleeing the city, but they’re being more strategic about where they can maximize affordability and quality of life.”
The big adjustment
In the New York City area, brokers and agents with Coldwell Banker Warburg offered opinions on affordability in what is one of the most expensive places to live in the U.S.
Broker Svetlana Choi said she has seen more buyer confidence in the past several months, and while there are still a lot of cash transactions, many purchasers are accepting the current interest rates and appear to be more willing to buy.
“Sellers are also pricing more realistically, and in doing so attract a lot of interest,” she says. “And in some cases, buyers are willing to pay over the asking price. Meanwhile, overpriced listings sit on the market longer and often are withdrawn.
“I’m seeing motivated buyers at every price point, from first-time purchasers to mid-career professionals, as well as empty nesters returning to the city, all ranging from $400K to $3M. Now there is much more focus and momentum to find the right property to meet people’s changing life stages, while still maintaining affordability.”
And this from agent Aaron Tetzlaff: “I’ve had the benefit this year of working on rentals and sales. I think among both high- and low-end sectors of the market there feels like a certain kind of stalemate in terms of what landlords and sellers are asking, opposed to what is realistic for most renters and buyers.
“Most of the clients I’ve represented on the rental/buyer side feel like they have to negotiate hard and do extra due diligence in order to find properties which meet their bare minimums but also come to a price point that actually reflects reality. Consequently, when I’ve been on the sell side or landlord’s side, we’re always trying to present realistic information to these clients. Letting them know that if they price their homes and apartments competitively, they’ll get a broader pool of interested and qualified buyers/renters.”
Tetzlaff adds that oftentimes it takes them a while, if not a few months to even a year, to realize that high prices will get you little to no interest, or even qualified buyers or renters. “Sometimes you look at the paperwork they have submitted and it’s shocking; you can tell they really want a place, but their finances just reasonably cannot stretch to account for what a co-op board or a bank would allow,” he says.
Warburg agent Abigail Godfrey feels that the educated buyer is not swayed by a slightly higher interest rate or a political result, instead recognizing moments of uncertainty amongst the majority and will use this timing to their advantage.
“While the number of signed contracts is remaining steady, we are noticing a slight dip in pricing in multiple neighborhoods and price points for buyers,” she says. “Sellers must be willing to negotiate on price unless their apartment truly is a one-of-one. Buyers have become comfortable with interest rates where they are, and have adjusted their pricing expectations over the course of the past year or so.
“As agents, we must continue to be completely transparent and diligent so that there are no surprises for the buyer. In particular, I have noticed buyers taking extra attention to closing costs and fees, whereas previously these numbers were anticipated but not needed to be within a certain parameter in order for the buyer to be able to afford the home. Every penny is accounted for now more than ever. So are homes more affordable, or is the NYC buyer more savvy with how they structure their offer and negotiate price? Seemingly a blend of the two.”
In upstate New York, Jeffrey Decatur, a longtime broker associate with REMAX Capital, admits that affordability is always a concern, having never met anyone who wasn’t concerned about buying a home.
“Our market is still reasonably affordable in comparison to the national average,” he says. “It has stabilized a little from the double-digit increases. Everyone is waiting for rates or prices to drop. Rates just dropped again for the third time this year. Each time another handful of buyers get back in the market, creating more demand and potentially causing multiple offers.”
