Aspiring home buyers shift expectations in hot housing market
SACHA PFEIFFER, HOST:
For many of us, it's hard to find an aspect of our finances that hasn't been affected by the economic moment we're in now. That includes people trying to buy a house. Home prices are high, and the number of houses on the market is relatively low. It's a bad combination for buyers. So what is it like to go through the house hunting process these days? Laura Lux and Jasmine Nazarett are going to tell us. Laura is in the middle of her search for a house outside Atlanta, Ga. And Jasmine is about to close on a home in Northern Virginia. Welcome to you both.
LAURA LUX: Hi.
JASMINE NAZARETT: Hi.
PFEIFFER: Would you start us off by explaining why at this particular moment in time you're trying to buy a house? Since it seems that if someone doesn't have to do it now, they should probably try to avoid it. And, Jasmine, would you start us off? Why were you looking?
NAZARETT: The reason I started looking is because rent prices are soaring. I am in the DMV area just outside D.C. And I'm expecting a pretty significant rent hike. I will say, like, the pandemic was tragic, and it has sucked for many people. But really, it helped me get into a financial space where I was able to save some money, not having to pay my student loans every month. And that moratorium helped me pay down some debt where I was in a financial position to save some money and, you know, just enough for a down payment for a home just anticipating these rent hikes. I have friends that, you know, they've seen their rent go up $600, $700 from one year to the next. I would have to move either way. So being able to save some money.
PFEIFFER: Are you - this - you will be a first-time homebuyer?
PFEIFFER: And it's a condo. Is that what you were looking for originally?
NAZARETT: Yeah, that is what I was looking for originally. It's a two bedroom-condo just outside D.C. That's sort of what I've been looking at. My price point changed. I was looking at places a little bit more expensive than where I ended up. But that's just the reality of the market and interest rates going up.
PFEIFFER: Oh, your payment was going to be higher. Oh, interesting. And, Laura, what about you? Why are you house hunting now?
LUX: I guess I'm kind of in the same boat as Jasmine. My boyfriend and I currently live in Austin, Texas, and the rent there has just gotten completely out of control. We both wanted to move in together at the end of our leases, which is at the end of July this year. And we got our lease renewals, and both of them have gone up by over $500.
PFEIFFER: Wow- - a jump of $500, a jump of 500 a month.
LUX: Yeah, both of us.
LUX: And I just felt like if I'm going to be spending thousands of dollars every month on where I live, I would rather it be going into an asset than into rent.
PFEIFFER: But you're looking in a totally other state.
PFEIFFER: Is that because you think it's going to be lower cost there?
LUX: That's more about the fact that we want to be near the mountains. We, like, we figured if we're going to buy, we're going to buy something we like. You know, we didn't - we looked around Austin. And everything in Austin is so expensive. You can't have like a private backyard there. Like in our price range, we were going to be living in one of those cramped neighborhoods where every house is next door to each other. We want a house on the lake. So...
PFEIFFER: And we should note that I believe you're in a moving car heading to a house-hunting appointment right now. Is that right?
NAZARETT: Yes. Literally just got off a flight. And I am in a car traveling through Georgia, about to go to a house. We're going to, I think, four today. We're looking at four places.
PFEIFFER: I'm wondering what has surprised you most about the process? Jasmine, what was that for you?
NAZARETT: I did have to raise my initial offer just a bit, and I was OK with that. But I think the, like, people just offering a ridiculous amount of money upfront and waiving contingencies, for me, it was never something I was comfortable with. Like, I don't feel comfortable moving into a house without an inspection because you never know what you're going to find - or my appraisal, because I don't have a ton of cash.
PFEIFFER: Jasmine, anything else surprised you? You mentioned, for example, interest rates.
NAZARETT: The interest rates definitely from when I started looking in January until now have just kept creeping up. And before I increased my offer on this home, I talked to my mortgage counselor who just had a very honest conversation with me and was like, the interest rates are not going down. So you can either take what you're getting right now or you can sort of wait until later in the summer when interest rates go up. And I think like two weeks later, the Fed announced that they were going to increase the interest rates. And I was like, well, like, thank goodness.
PFEIFFER: It has a real effect on monthly payments, a real negative effect.
NAZARETT: It has a huge negative effect for buyers because just looking at what the monthly payments would be with just like the slightest of increases can be really scary. You know, I don't have a family that I can sort of - I don't have a safety net in terms of my family. So I'm kind of doing this on my own. And I - those numbers can be very scary, which is also why my price point came down a little bit because as the interest rates went up, sort of my buying power just totally changed.
PFEIFFER: Laura, what has surprised you most about the house-hunting process?
LUX: I think - I guess like I sort of went into it maybe a little overconfident because I am in a position where I have significantly more cash to be able to put down than the average buyer. And, like, I sort of went in being like, no, I think I'll be fine because I have like a pretty solid, you know, if I have to, I don't really want to, but if I have to, I can offer a pretty significant chunk of cash down. But what we have been running into is the kind of properties that we are trying to buy. We're getting outbid by ultra, ultra wealthy investors who are just planning on putting them on Airbnb.
NAZARETT: I find it just so interesting that, you know, we're both getting, you know, we're facing sort of the same challenges of like just being outbid. Even though I didn't have a ton of cash, like, I was like, wow, like, I thought it would be so much easier for somebody who did. But hearing your story, Laura, is definitely like, wow, no we're - like, if you're trying to find your home, you're just kind of in a really tough place versus an investor.
LUX: The investors have absolutely ruined the market, I think. They've made it so difficult for the average person to just buy a house to be their home.
PFEIFFER: Jasmine, we mentioned that you're in the waiting period before you close on your house in June. Now that you've almost successfully made it to the other side of homeownership, what advice do you have for people who are still looking?
NAZARETT: The advice I would give is just to be patient. All the homes that I put a bid in, I was like, this is it - and they weren't it. And it was so, like, heartbreaking. And the first offer that gets denied is definitely the hardest.
PFEIFFER: But, you know, being patient also means being willing to watch interest rates go up, which means your payment will keep going up or the payment you thought you were going to pay. So there is a downside to patience.
NAZARETT: There's definitely a downside to patience. Starting and like sort of going into things with like an open mind and, you know, just being willing to say, like, what are my trade-offs and, like, what are the things I absolutely need? For me, because I live in the DMV, I was like, I want a garage where I can park my car because I don't want to deal with the snow. And I just wanted, you know, enough space where if my family came to visit, they would be comfortable, and I could have like a space for an office because my workplace has gone to being remote first. So I'm at home all the time. And so I was like, these are like the things that I need - space. Somewhere for my car that's not out in the street.
NAZARETT: That's a very smart way to think about it. what are your must-haves? Laura, as we're talking about all these obstacles to buying a home, I'm wondering, since you're still looking, is there anything that could happen that would make you say, you know what, it's just now's the wrong time, I'm going to stop looking and wait, even as you're facing these big rent increases? Are you bound and determined that you're going to make it happen soon?
LUX: Oh, we're determined because we've already given notice at our apartments in Austin. And it's just - it's too expensive. So I'm going to find something. Like, we're going to make it happen. We're just going to - we have somewhere to go, like, temporarily if we don't close in time. So we'll be fine.
PFEIFFER: Well, good luck to both of you - Jasmine, you with your upcoming closing, and, Laura, you finding just the right house. Thank you very much.
LUX: Thank you. I am about to get out of the car and go and inspect one, so wish me luck.
PFEIFFER: Good luck. Laura Lux searching for a house outside Atlanta, and Jasmine Nazarett will be closing on a condo in Northern Virginia in a couple of weeks.
LUX: Thank you so much.
NAZARETT: Thank you.
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