Posted on May 25th, 2016
For home buyers such as Evan Liu, buying that first home is proving to be difficult. More than one year ago, he was ready to buy his first home. He offered 5 percent over the listing price for a two-bedroom small condominium in the Jamaica Plain area and was planning where he would put his furniture in his new home.
He got a rude shock on the reality of Boston housing prices when his realtor said there were 18 other offers and his reasonable offer wasn’t even in the top three offers. The condo sold for $400,000 which was 11 percent over the actual asking price.
The entire experience was disheartening for 28 year-old Evan Liu. This is exactly what is happening to first-time home buyers in the Greater Boston area. There’s a lack of homes to choose from and rising prices for the ones that are actually available. For those looking to become first-time buyers, they face an uphill battle.
The Reality
Some buyers have spent months looking at homes and making offers while raising bids, but end up disappointed. Evan Liu made 13 offers for properties in the South Boston, Jamaica Plain, and Somerville areas with an average of $20,000 over the asking price of the home. He still rents a one-bedroom apartment in the Somerville area for $1,900 per month. He thought he would find a property in a few months, but so far it’s been over a year and a half.
According to Carlos Xu, Broker of Lexwin Realty, Boston real estate suffers for several years of low inventories and rising prices which is making it difficult for first-time buyers to actually purchase that first home. First-time buyers account for more than 40 percent of all the buyers in Massachusetts when compared to 30 percent annually says the National Association of Realtors.
With short supplies of homes, first-time buyers face stiff competition from other buyers for homes that are actually available. Those with higher incomes can afford these homes and will pay whatever it takes to get them. There ends up being bidding wars which prices many first-time buyers out of the market. Buyers have to act quickly, even the first day of the listing to stand a chance of getting the home. Open Houses tend to be packed and many offers are made during the open house. Sellers are going to take the highest price offered to them.
In areas where people want that are close to schools, other amenities, and have nice communities, it’s extremely difficult to find a home as they are all bought quickly. Many families make multiple offers on homes, but end up empty-handed due to so many offers on the property. Some properties have offers that are $50,000-$100,000 and higher over the asking price which prices many out of the market as they can’t afford the higher costs. It’s often not enough to have a good income as there are buyers that will snap up homes well above the actual asking price.
Low Supply
There’s simply too much demand for Boston real estate and not enough home on the market to meet the demand. In the current year, the cost of a home is 2-10 percent higher than just last year because of the demand. Many homes are now over the $1 million mark in some areas which is simply too expensive for the average home buyer to afford.
With the low inventories and rising prices, the cost of a home and availability of affordable ones in Boston isn’t going to change anytime soon.