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First-time home buyers in Southern California find themselves in an unenviable position. Higher interest rates and lower inventory levels put prices out of reach for some buyers. In other words, they find themselves priced out of the market. You may have heard that term before. But what does it actually mean and what should you do if you find yourself in that position?
Priced Out of the Market
What Does That Mean?
Basically, being priced out of the market means that prices are so high that you cannot afford to purchase even an entry-level home. That may turn these potential home buyers into more permanent renters. Or they may decide to move on to another city or even to another state where their dollar stretches further.
What Can You Do?
Save, save, and save some more. Unfortunately, there is no way around that. First, take an honest look at your regular expenses. Second, create a budget. Figure out where you can cut out excess expenditures. Next, start paying down as much debt as possible. That may mean keeping your car for longer than you thought instead of buying a new one. Even smaller changes in your everyday lifestyle add up. Like bringing leftovers for lunch. Or switching from that huge cable package to one or two streaming services. Make movie night at home a regular ritual instead of a night out at the movie theater. Search for free recipes online and then get the kids involved in making dinner using that recipe. The best way to not become “house poor” when you do eventually buy your house is to make sure that your debt load is as low as possible.
Smarter Savings
Along with lowering your debt load, you may want to continue setting aside a certain amount of money each month. Even if you decide to concentrate only on paying down debt for now, take the money you already saved up and make a change or two. Seek out a high-yield savings account instead. Or ask your bank for a better interest rate on your current savings account. If you find another bank willing to offer you a stronger interest rate, open an account there. Make your money work smarter for you.
“Wants” vs “Needs”
Set a realistic vision of what to look for in your new Southern California home. Brand new construction may be out of the question with your budget. Consider an older, slightly smaller home instead. If you are willing to put in some sweat equity, look at purchasing a fixer-upper. Turning the worst house in the neighborhood into the best house brings about the highest equity. You may even need to look outside of your favorite neighborhood in order to find a home in your price range.
Find the Right Agent
A great REALTOR® can take you a long way in buying a home. Interview several agents before deciding on “the one”. Don’t be afraid to ask lots of questions either. For example, how many homes have they helped buyers find? How long have they worked in the area? What was the best experience they had while doing so? What was the worst and how did they overcome those issues? This helps you determine whether or not they offer a good “fit” for you. After all, this will probably be the biggest financial investment you make in your life. You need someone that you feel comfortable with handling this important moment for you.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
