Great first-time buyer expectations

So first time buyers are just whiney punks because they want to buy a house they can actually live in?

The spoiled brats!

The missus and I are currently saving for a down payment and looking. We're not considering "fixer uppers" not because we're afraid of a little work, but because "fixer upper" in real estate listing parlance means the place is a pit that rats haven't infested only because they don't like getting rained on through the roof any more than people do.

Whenever I see listings that say "needs TLC" or "Fixer upper" or "Handyman's dream," I browse on. I'm willing to entertain "needs cosmetics" but I have zero interest in taking out a huge mortgage loan and then having to shop for a huge home improvement loan to pay the contractors to replace everything.

This sounds like the the same things that my wife and I wrestled with before we bought our 1st place this march.Our price point was low(200k). Since we are finshing pay our debt over the next year, we do not have the money for major upgrades. We were lucky and found a nicely mantained house in our price range in Attleboro. I think the term fixer upper is misleading.Yes any house needs some work done on it. However, you should not need to spend thousands of dollars ,right after you buy it , to make it livable.

Fixer-upper or not, the male half should really learn to be a handyman. You'll always be working on the upkeep of your house. Instead of hiring someone to change your light fixtures or replacing your kitchen floors, do it yourself and save some money.

My wife and I (we're both 27) closed on our first home at the end of June. We only looked at townhomes in Boston that were built in the last 5 years or so. Our priorities were:
1.) No yard (I didn't feel like dealing iwth it)
2.) move in condition (the only thing we wanted to do was paint)
3.) was in a safe neighborhood (hard to find in Boston)
4.) easily accesible to the T
5.) S/S appliance and in unit washer and dryer
6.) Private roof deck.

We found everything we wanted for the price we wanted and we couldnt be happier

I'm also trying to be a first-time house buyer, and the considerations mentioned are priorities for me. I too am focused on affordability, access to work/location, and move-in condition. I would certainly consider a fixer-upper, but I would have to add the cost of renovations to the price to calculate its affordability - if a fixer-upper was at the top end of my affordability limit, but would require $25 thousand in renovations, then it is actually $25k above my affordability limit. The sale price would have to be $25k less for me to buy it. Since I'm still on the sidelines, maybe it's not realistic in this market. But I have no doubt that it will be realistic before long - prices are getting tantalizingly close to my range, and I will get either a move-in condition house at my affordability limit or a fixer-upper below it.

So, after saving money for years, this mental midget is asking that we buy the 1800's era barn in the back for lots of money, so that he can make a comission. Note to first time buyers. Now is NOT a good time to buy. You will regret your decision for the next couple of years. There is a massive on-flow of soon to be defaulted on loans on the "nicer" properties by homedebtors with Alt-a, and prime mortgages resetting in the next 1 or 2 years.
This is going to get so bad, that the fed today pretty much told WS that they are on their own, as the problem is too big even for them. The best advice right now, is to save money, and live within your means.
Good luck to us all.

The female half should learn to be a handy(person) too. There's no rule saying the guy has to do everything. I've actually enjoyed the experience so far of learning how to fix, replace and maintain my own stuff. But I've never been the type to care about breaking a nail, either. Break out the painting clothes!

I think there's a big difference in perception of "move-in condition" here. It is what it says - a property that can be moved-in to right away. As a prospective first-time homebuyer who's paying rent and has a full-time job, I don't have the luxury of buying a house and waiting a few months while I pay contractors to make it livable. Move-in does NOT mean perfect, however. Outdated (but functional) kitchens, old bathroom fixtues, anything related to decor - can all be replaced over time, as the money becomes available.

I am insistent that a property I buy be move-in ready, but I'm realistic that I won't be buying my dream property for my first home.

"Fixer-upper" used to mean a house that needed basic-to-moderate repair work; not so anymore. What I've noticed is that "fixer-upper" in our area has meant the home usually needs serious work (like an entire new sewage system) or should just be torn down because it is an absolute hovel, inside and out. Many of them aren't even livable, forget about move-in condition.

In my experience as a first time home buyer, the real estate industry is unhappy that buyers are turning up their noses at houses that need a lot of work. Due to the excess inventory, there are probably a lot of houses that don't sell because of the repairs. It must be annoying to realtors, after being able to sell houses in 2001-2005 to suckers regardless of their problems.

Too bad. There are enough houses on the market right now that you don't have to buy a money pit because your realtor wants to get a commission.

The realtors should be thankful to have paying customers these days, and they should work on getting sellers to be honest about the problems in a house. There should be very few major surprises during the home inspection. We experienced surprises at home inspection that would have taken $65k-$150k to fix. No thanks.

Ok, maybe we are a little picky with houses nowadays. I don't mind putting some work into the house over time. When every person looking for a single family is stretching themselves to get into house. Now Coldwell wants us to pay tens of thousands of dollars more to fix the place up. The problem is I see these fixer uppers listed at 350k and 400k. If I am spending that much money then I am going to want something that doesn't need much other than some cosmetics. I laugh when I see these places listed with "need TLC".

It's not buyers' expectations that need adjusting, it's sellers'. They, and their agents, want to kick back and defer all maintenance for ten or twenty years--then find a sucker to pay them full price anyway.

We've discussed this here before. A fixer upper needs to be priced properly, deducting the cost of necessary renovations. Almost no houses around here are.

Realtors like to just wave their hands and issue dismissive comments like, "you'll want new kitchens and baths" (a $100k expense), since they are concerned only with their commission, not whether you can actually afford the house.

We've also said before: Eastern Mass. housing stock is horrendous. This chicken is now coming home to roost for a long, long time.

The problem is plain and simple. Fixer-uppers are still too expensive. Back in 2005...you could charge a premium for a house's "potential". Now people don't want to pay for "potential", they want to pay for the home's tangible value. Is the kitchen new? Good...because remodeling a kitchen will cost at least 20K (more like 40k).

I'm all for first time homeowners getting into the market with a little "sweat equity", but since the flippers have left the market, paying for "potential" is for chumps.

Seriously, when prices for starter homes in the Boston area are still well over $300K (and that is in more outlying areas - we're not talking the inner suburbs) who can then afford to fix it up on top of that? These realtors are the unrealistic ones trying to scam would-be buyers. (I can say I won't be looking at Coldwell to be my realtor that is for sure).

On a sort of related note, it really fries me when I see houses pushing 500K with ONE bathroom. If you are paying almost half a million dollars, your money should purchase more than ONE bathroom.

as a 2nd time home buyer (just moved into house #2), I have to say that I think 1st time home buyers should be very concerned with thorougj inspections and good legal representation -- it's so worth it. Just about everyone I know agrees that they were "so naïve" when buying their first house -- mostly because of the excitement and eagerness to get in.

We just purchased our first home (as in one week ago!!) and we found what we were looking for in Grafton. We wanted a small house in a quiet residential neighborhood that was "move in". Our house is in need of many cosmetic updates (like paneling that was on the wall and very old dated carpets etc...) and overall updates (like the kitchen and bathroom) but everything works just fine and we can work on the house a little at a time. We are doing most of the work ourselves as we can afford to do it. Even though people say its a buyers market, being realistic was key. We knew not to bother looking at houses that were way above our price range expecting them to accept a price $100K's below asking price. I think this is where first time buyers are getting into a rut. I know some who expect to purchase a $600K house for $300K.... not going to happen. Another thing, we found our house because we went to look at anything regardless of the listing description. This house said "all systems need upgrades". yes we saw our share of disasters but we also saw some really cute places that needed some cosmetic upgrades. So don't discriminate and take a chance you never know what you are going to find :)

You won't find me disagreeing with any of the people on this board who discuss the ridiculousness of those who expect first-time homebuyers to choke up $350K for a starter home and then invest another $50-100K. Frankly, at an annual income of $115K and wanting to start a family next year or 2010, we can't afford that, so its moot to say that's what we should be wiling to choke up or what current home owners think about "worth." We can't afford it so we aren't going to buy it.

Those housing costs don't even include some of most young buyers anticipated expenses for commuting (getting even more expensive right now), day care that starts at $1500 for an infant (more like $2K a month), existing student loans (a bill that almost any Gen Y person has to pay) and so forth.

Prices of homes, whether realtors wants to admit it or not, are largely out the reach of first time homebuyers and these buyers are crucial for the eventual housing turnaround. A major correction is in order. I'm not looking for a dream house--we've been looking at plenty of homes that appear more like crackhouses than homes, but, we're not going to pay $350K for a major fixer upper.

Even if the market is going up, we're not going to pay anymore than what we think we can comfortablely afford--any other considerations or trends is a far second.

I agree with everything here. Someday I'll be a first timer, and while look I've seen a lot of garbage. Trouble is, the garbage is expensive. You expect me to buy something I can barely afford, and then come up with $20-$50K to fix it? Handyman that I may be, I also don't want to spend the next 2 years of weekends working on a home.

Also depends on what a 'fixer upper' means. One fixer was in a bad neighborhood, far form the T, not that big, with windows and porch rotting out and it hadn't seen any update in 40 years. That's a gut, not a fixer upper. And I would barely be able to buy it, never mind sinking any money into it.

And you, the agent, have also changed expectations over the years. Used to be a time a buyer was expected to paint everything when they moved in, and maybe do some minor repairs. Now that houses are no longer homes but investments, and with terms like staging and neutral colors part of our vocabulary, yes, we the buyer do expect more

No no No, you do not live in an investment. That is not the point at all; realtors can't change the reason for buying. Yes, its the 21st century so you will see fancy marketing techniques like staging and using lots of pictures and the Internet.How does this change your home into an investment? It does not. You buy for the same reasons people have always bought - security, the best deal for you, etc. Realtors haven't changed either. They still charge the Seller a huge percentage.

Nothing is different except the buyer's attitudes. Houses have always been expensive, and difficult to buy. Everybody could barely afford it when they bought. A lot of people think owning a home is a very good deal and it makes ongoing financial sense for a lot of folks. But, you always have to fix them. I f you go out and buy a brand new house - and you won't be getting that for the 300,00- 350,00 you people want to pay - then maybe you don't have to fix your house for a year or so. If its exactly as you want. For example I started with a new house that had wall-to-wall carpets and vinyl floors; I have changed all that to hardwood and ceramic tile but the heating system is now 20 years old. I could put in a brand-new furnace before I list the house but it would be an inexpensive model, not necessarily what I would choose if I were going to be living here. So I leave this and other things that fall into similar categories for the people that will live with the choice and price my house under 350. It'll be clean and painted and everything works; you'll get a new low flush white toilet but the blue tub is not the latest model, neither are some of the fixtures. I think this is move-in ready and work on it as you go. That's what houses are - used. If you don't want any responsibility for repairs and upgrades you should stay a renter..
If you are lucky, your new home will appreciate in value in addition to giving you a nice place to live with tax advantages. But if you are out to make money in Real estate, buy a REIT or become a landlord. If you are going to live there, buy a home and definitely treat it with tlc. They really do not just appreciate sitting there - they deteriorate.

What frightens me first time home buyer stacey myers is that nobody including you listed location, as in how nice a town is, as a top priority. First time home buyers better realize that the towns they purchase in matter VERY much, and I personally put that much higher on my list than a washer/dryer hook up. Do they look up the school system ratings? Do they look at average annual family income?

First time home-buyer's buying in North Andover and Lawrence are going to be happy as clams, provided they have washer/dryer hook ups and they can get to work?! Please.

Sure, I could move right next to where I work, but then I'm limiting my choices, I hate the area, and I may not be working there for the rest of my life. Also, my boyfriend and I work nowhere near each other,so who wins?

We just purchased our first home, (def. not a starter home) in a great town bordering a great town's conservation land- that's important, and not one person noted that. Buying a house in a town that's bordering a bad town causes your home's value to be less than a house on the 'good side' of town. So yes, my taxes are a bit high, but I'm in an area that has had steady good home sales at steady good prices and am surrounded by nice homes and nice bordering towns. Perfect example: Stow's a nice town, but prices usually decrease when they're right next to Hudson.

But you can wash your clothes in your home.

I am going to wait a little longer to buy. It doesn't take a rocket scientist to figure out things are only going to get worse for everyone, and that $300k house that was purchased for $15k back in 1980 is going to have to come down even more in price. Real Estate agents are desperate and willing to say anything to make us think we need to buy now before the market goes up again. HA , people think gas is bad now, wait for this winter. Rent with heat included is a life boat at this point. First time homebuyers and veterans alike are going to be humbled when their heating bills are more than their mortgage payments ( this winter people ). Forget about daycare and student loans... This is what really gets me, these nice big houses our parents bought for 30k-150k , thirty to fifteen years ago should not be worth 500k by now, i know salaries haven't kept up with that kind of inflation. As a full time fire fighter ( NOT IN BOSTON ) i have a hard enough time getting by also working a second full time job, and having to deal with every taxpayer in your town wanting to take away what little money you do make while the real problem lays in Joe Executive living in his 800k house making 300K a year and as a result now we all have to pay $14 dollars for a weeks worth of razors to support his lifestyle. HA HA sad but true. The rich want to get richer, they want their houses to go up and up and up, but lets be honest, it's about time things went down again. Even if i can afford that 250K fixer upper i refuse to pay that much for someone eles junk. I know plenty of other people who feel the same. I'll bide my time, and laugh as the dollar shrinks, oil rises, and our economy goes down the toilet. Somewhere through it all this housing market that has destroyed the American dream for our generation will even out and we can all get a piece of the pie. Just not yet.

This is not at all surprising really. The market is basically broken right now, its frozen. All the factors that kept prices skyrocketing in the bubble have been taken out (one more time for the slow folks: liar loans, zero down loans, giving anyone who asks 8X their income to buy a house, etc.), so the market should correct. The reason it has not is that sellers refuse to return to a market price due to emotion or denial of reality.
Since sellers won't accept reality, they just dont sell and expect a return to the crazy bubble years (which wont happen again anytime soon). So who sells? Only those who must. Divorces, job losses, financial distress, deaths. Those selling often clearly go through a lot of financial distress and forego maintenance work. This is part of the reason so many houses on the market are dogs. There was a good article on CNN recently called, "These houses suck", basically bemoaning the horrible condition of most houses on the market today.

if you're willing to take on the risk that an avoidable major repair will surface while you still own, it makes sense for home owners to defer maintenance. it's easy to find some do-it-yourselfer when you go to sell who discounts fair market value by the cost of materials b/c they can do it themself. why pay for labor now when somebody will do it for free later and convince themself that they are getting a great deal. or find someone naive enough to not research local market value cost of repairs to overvalue your property. talk about market inefficiency. a stitch in time can be very apropriate when it comes to home maintenance so beware of latent defects, especially when the owner is so categorically lazy as to not even attempt to mask the deferred maintenance while their house is on the market.

There's a reason homes in the Boston area are so expensive...it's one of the few places in the US where people really want to live...paying $350k for a 2 bed, 1 bath fixer upper stinks....paying $350k for a McMansion in BF Oklahoma stinks more! Suck it up. This market is near bottom...look for a recovery next year...those of you who didn't buy now will regret it when prices begin to go up again...I'd rather buy a fixer upper built before 1960 than the crap the developers are building now...vinyl clad POS Home Depot specials...those homes start falling apart in 5 years...

"Starting a family soon" - don't even get me started! I think we need an entirely other blog dedicated to figuring out how we're supposed to afford the mortgage on the typical entry level house in eastern MA (350K if you're lucky, and UP) AND THEN be able to afford raising a child on top of that.

Its a real dilemna on what to do. When a house is on the market for what is clearly still bubble pricing, do you offer less? How much less?
If the seller bought the house 5-8 years ago for $150K and now wants to sell it for $600K (this is not atypical), does that makes sense? Its clear we are still seeing asking prices that are bubble priced. The comparables are no use, because the volume of sales in 2008 are so low and it is so hard to find good comps.
I think the best bet is to make an offer for what you think a home should be worth. One way to do this is to look at the purchase price pre-bubble and then extrapolate a reasonable or high inflation value on top of that. e.g. appreciation of 5% a year. This normally yields a value of about half the current asking price. I certainly would not be afraid to offer 80-90% of asking if that makes sense.

The problem is that Eastern Mass has a lot of junk housing. Actually, that's not the problem - the problem is the expectation that one will pay full price for said junk, not the discount it deserves.

When you factor in the amount it costs to fix a place up, already overpriced Mass real estate goes throught the roof. Most "fixer-uppers" are effectively priced higher then equivalent houses in good condition.

You could put it as

(Price of Fixer upper) + (Cost to fix it) > (What fixed up house could sell for)

And its yet more proof that the Mass real estate bubble isn't even close to being over, and prices are way above bottom. In a standard market the great than sign above is a less than sign.

I agree with the poster that said that houses have always been expensive and people when they first buy could barely afford the payment. This is true but back in the day the big issue there was saving up a down payment. Or enough to qualify for a loan and pay PMI until you have 20-22% equity. Starting in 2002 all these alternative financing options were introduced. Interest only, 1,2,3,5 year arms or some combination of both. No people on this blog tend to refrence the housing boom from 2000 until 2005/2006. But for those people who have stated that Boston is a place people want to live the rise in home prices from 1994 through 1999 represents that desirability. The economy was hot then especially in the Boston area and builders were starting to build those Mcmanisions. That rise is home prices was sustained by the growing job market. You can also attribute some the price increase to the limited amount of land available for developing new homes. If you look at any set of housing data you will notice a nice steady climb in home prices up until 2001/2002 and then a huge runup in prices almost exponential. This was all due to easy credit and people with bad credit could not get houses and people with good credit could quality for even more money. And for a limited amout of time the banks were able to keep payments low. For example, if you bought a house in 1997 for 200,000 you payment would be around 1,500 with PITI and then in 2004 you could buy a 400,000 house with a payment around 1,500 with PITI. Most of these loans for 400,000 were 5 year arms that were interest only. Well, in 2009 those principal payments will come due for those folks. And during that 2004 through 2006 time frame the majority of home in MA were bought with those types of loans. Those monthly payments will essentially double when you include the interest payment. So all that easy money has tried up and it is much much harder to quality for loans for those homes that are priced in the 400,000 to 500,000 dollar range. This is the reality of the situation.

As a first-time home buyer in coastal North Carolina, I wanted to give a big sarcastic "THANKS" to the fiscally irresponsible folks in the great snowy northeast. As y'all move here in droves, your inherent inability to keep home prices correlated to income has spread here too. This bubble is what happens when "keeping up with the Joneses" is carried out to its conclusion.

It isn't inablility to correlate, it is what folks are used to. When one is used to paying 5x income for a home, then paying 3x isn't a problem. If one has lots of equity in a New Eng. home, you have to plow it into the next (cheaper one) to avoid capital gains.

You down in NC have an increasingly desirable place to live. Get used to supply and demand in economics...

BTW, have you looked at Chicago prices. Eek!

Thing is, 3x income is affordable. 3.5x income is pushing it. People honestly can't pay for 5x income without cheap credit (which has vanished).

Prices will thus regress back to 3-4x income tops, which will be a big hit around most of the country

It was always ingrained in me from when I was in college, and considering buying someday, that the rule is "3x income".

I wouldn't have dreamed of considering something outside that limit. That being said, it was very difficult to find something far below that guideline.

I don't understand why more people weren't aware of this rule. It's a good method to follow. I guess when throngs of people are used to going out every weekend and buying a new flatscreenTV/designer handbag/furniture/jewelry on credit without thinking twice about the cost, it wouldn't occur to them to calculate whether a home is "affordable" for them. It's just another thing to put on credit! Charge away! (or in this case, mortgage away)

yep, that's right LL. People don't look at what they can afford, they look at what they can pay for. And those are very often 2 different things.

And with funky mortgages a lot of people could pay for a house they can't actually afford. For a time. But eventually that Arm adjust and starts amortizing, and now you have to pay the real cost. Which you can only afford if you paid 5x by cutting luxuries like eating, heat and transportation out of your budget.

Its still difficult for most to find something 3x income out there. Which means something has to give. Math is simple, either income goes up, or prices come down. Pretty easy to guess which will actually happen.