Real Estate - Residential

First-Time Homebuyers Face Challenges

By Cece Nunn, posted Nov 17, 2017
As first-time homebuyers, David Russell and his wife, Camila, were able to find this house for about $176,000 in Leland’s Windsor Park. (Photo courtesy of David Russell)
Duane Hixon wasn’t in a position to buy a house as early as he wanted.
“My wife and I both graduated school with debt, so we saved for a down payment while trying to pay off student loans and keep up with rent,” he said. “It wasn’t easy, but we did it. At age 26, I became a homeowner.”
Challenges faced by first-time homebuyers these days in the Wilmington area range from not making enough money to save up for a down payment to a lack of homes in the entry-level price range.
Hixon is now CEO of N2 Publishing, a rapidly growing company that publishes customized neighborhood magazines and has 750 franchises in 47 states. The firm announced in October that it would be offering an incentive program to encourage first time homeownership for the more than 250 people who work in the N2 corporate office in Wilmington
“The goal is to, quite literally, raise the roof over as many team members’ heads as possible,” said the announcement from N2. “Through the program, qualified team members will receive $7,000 to be used towards the down payment on a home.”
To qualify, an employee must have been with N2 for a minimum of two years, be able to qualify for a mortgage and be a first-time homebuyer.
On the reason behind the decision to start the program, Hixon said, “Most people who start a company want financial freedom – something better and different for themselves. I desire the same for the people I work with. Now that N2 has experienced success, it’s very rewarding to put programs in place that help our people achieve major wins like becoming homeowners.”
Realtor Tom Gale, who leads Team Gale at Coldwell Banker Sea Coast Advantage, said working with first-time homebuyers can be a fun experience because of their enthusiasm and eagerness to learn about the process.
“It takes me back to when I bought my first house,” he said.
One of the challenges he’s seeing is the lack of inventory in the Wilmington market for homes in the first-time homebuyer range, which often can be under $200,000.
“The builders, it’s very hard for them to buy land at a price that allows them to sell homes at an affordable price anymore,” Gale said.
Some builders have been increasing the supply of homes just under or around $200,000. For one example, homebuilder D.R. Horton recently announced the expansion of its Express Homes brand, which starts in the high $190s, to the Leland community of Sunrise Terrace.
With the help of Gale, David Russell and his wife, Camila, bought a home for the first time this year in Leland’s Windsor Park neighborhood. Their 1,800-square-foot house cost about $176,000.
“We were looking everywhere, really, mainly just looking for something in a certain price range and wanted to get something in the budget we had set aside for buying,” said David Russell, who works in Wilmington at tire wholesaler American Tire Distributor.
Their budget was $180,000.
“Our ideal place to be would have been Wilmington … every house that we looked at that was closer to the size and newness of ours was $230,000, $240,000 in Wilmington,” he said.
Gale’s help made the process easier, David Russell said.
“We love it,” he said of their three-bedroom, two-bathroom home. “There’s not much I would change about it really.”
Although Wilmington and New Hanover County still have some properties under $250,000, more opportunities are available in Brunswick and Pender counties, particularly in Brunswick County, said Tim Milam, president of Coldwell Banker Sea Coast Advantage, whose firm had sold nearly 6,000 homes this year as of Nov. 1.
Interest rates are always a factor, he said.
They’re still “so very low. If rates were 6 or 7 percent, this would be a whole different topic of conversation because they’d really be pushed out of the market, unfortunately, a lot of first-time homebuyers,” Milam said.
But with rates hovering around 4 percent these days, the difference between buying a $175,000 home and $250,000 home isn’t substantial enough to make the purchase impossible, Milam said.
It’s important to keep other expenses down, such as credit card debt and car payments, he advises.
And a first-time homebuyer should be comfortable with the mortgage payment they’ll have to make.
“You gotta have a roof over your head, so focus on that being your first objective … in some cases we’re advising people that maybe they shouldn’t buy because if they can’t afford it, we don’t want them to buy,” Milam said.
Gale said he’s “very proud to work with some builders that are still able to offer homes in the $140s brand new, but that’s certainly getting harder and harder to be able to do.”
They’re building farther and farther away from Wilmington to be able to provide homes at that price point, he said.
Across the country, homebuilding in general isn’t keeping up with household formation, said Steve Murray, president of REAL Trends, a Colorado-based firm that provides news, analysis and information on the residential brokerage industry. Wilmington-based residential real estate firm Intracoastal Realty is a client, and Murray recently gave a talk to about 200 agents there.
“You have about 1.4 million new households a year being formed, but we’re only building 1.1 million residences,” he said.
The majority of Americans still want to own their own homes, and home ownership, which had been in decline since about 2004, has increased in the past two quarters of this year, Murray said.
The Wilmington area’s average price, which had risen about $10,000 to about $260,000 for January through September of this year, is lower than in other areas.
“For North Carolina big cities, this is still one of the most affordable towns in the state,” Murray said. “The Triangle, the Triad, Charlotte, Asheville – their prices are a lot higher than yours are, and they’re booming. They’re running into the same problems – finding affordable land.”
Despite the strength of the local housing market and economy, it’s likely to continue getting harder for first-time homebuyers to find exactly what they want or need, industry professionals said.
“I wish I could say it’s going to get easier, but I think it’s going to get more difficult … Interest rates rise and availability shrinks – that’s not a win-win situation,” Milam said. “Ultimately, your goal would be [buying] sooner versus later.”
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