Can't Afford Where You Live? One Alternative Solution for First Time Home Buyers

In her Wednesday, August 1st, posting, Can a 650K Home Be Considered a Starter?, Kathy Murdock, author of AllBusiness.com's Working Mothers blog, writes about a home she and her husband have been eyeing in their Bay area neighborhood. Though being advertised as a starter, the home's whopping 659K price tag is enough to discourage any first time buyer thinking of purchasing a property in San Francisco, San Jose and surrounds. My business is in Seattle where the median home price is roughly $420,000, significantly less than the aforementioned property's. My heart goes out to buyers in her market looking for that first step into home ownership.

Our robust and growing local economy supports wages typically thirty percent below those of the Bay area thus first time home owners here are experiencing similar pangs of disillusionment, if not all-out exclusion from what one commenter to Ms. Murdock's post terms, "The American Dream". My purpose is to assist my clients in any way possible to achieve that dream. Of course, conventional loan limits (in the low fours last time I checked with my preferred mortgage consultant) make it infinitely more possible to play in our market as a first time home purchaser, keeping in mind of course that a zero-down loan on $400+K is a sizeable monthly payment. For buyers in Ms. Murdoch's region, diverting into the sub-prime or jumbo loan markets seems their only option.

I, as a real estate professional, am not immune from feeling the shock of ever increasing home prices. Frankly, I see no end in sight. In the Pacific Northwest, Seattle specifically, housing prices have appreciated on average 3.8% per annum over the last thirty years or so. Although I do not have recent figures at my finger tips, I'm willing to bet the ten to twenty percent annual appreciation our market has been enjoying the last five years or so would skew that average considerably. However, ours is a pretty stable market, with neither hysterical upturns nor slumps. Historically, California's regional swings have been much larger with peaks and valleys varying as much as thirty percent in a year. Still, over time, the market appreciates. If there is ever a moment to become a first time home owner, it's the present, in my opinion. How many times have you heard someone say, "If only we had bought the house then"? If you're in the market for more than just an opportunity to invest, flip and realize a short term gain, I believe you may count on continuing price increases and appreciation, especially if your plan is to stay put in your new home for five years or more.

That, however, does not solve the dilemma for those who cannot afford the half million dollar-plus cost of entry into certain markets around the country. I spent much of my adolescence and early adult years living in Europe where home ownership was neither a given nor accessible for significant swaths of the population. In countries such as Canada, to the best of my knowledge, homeowners may not write off their property taxes when filing income taxes, a benefit we Americans guard vigorously. We do tend to take our right of home ownership for granted. Still, investment in real estate, even for first time purchasers is neither unrealistic nor unachievable. While you may not be able to secure a house in your own neighborhood, consider making an investment in more affordable regions around the nation. There are markets where housing prices remain reasonable, yet their economies are growing. Becoming an investor and landlord is a viable means of building wealth which you may then convert into a down payment for a home in your own area sometime in the future. Of course, there are inherent risks. Educate yourself and seek qualified counsel before traveling that road. Real estate continues to be top amongst investment strategies. With loan programs morphing and adapting to meet ever-changing market conditions, getting advice from a reputable mortgage consultant is also recommended. Bottom line, if home ownership is your ultimate goal, thinking outside the box may yield some surprising results.