First-time homebuyers share tips on how to beat market

For Robert and Laura Sevilla, a year or two of living with family to save for a down payment on a home eventually turned into seven.

The couple desperately wanted a place of their own, but yearned to be on more solid financial footing before their house hunt. So instead of renting, they decided to build up their savings by moving in with Laura’s parents in 2014.

It’s the kind of sacrifice first-time homebuyers are used to in New Jersey – a high-cost housing market that’s only gotten more daunting amid the coronavirus pandemic.

So what’s a first-timer to do? Shoppers and real estate agents in North Jersey say there are ways to snag that dream home, even with prices soaring by 25% in some areas. New buyers just need to be flexible, deferring and even downsizing that dream to find the right opportunity.  

“We wanted to save for a significant down payment,” said Robert Sevilla, 37. “We waited until we were in a strong position.” 

After searching throughout north New Jersey for the past two years, the couple and their two daughters plan to move into a new home in Morris Plains this month. Their patience paid off with an accepted offer on a four-bedroom split-level home for $612,000, right within their budget.

COVID has wreaked havoc on the housing market for first-time shoppers, as young customers with limited bank accounts face soaring prices and competition from cash buyers who can waive home inspections. 

The pandemic sent customers flooding into the suburbs in search of more space as working from home became common. With fewer people willing to sell during the health crisis, inventories dropped and properties fetched multiple offers as soon as they listed. 

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The median sale price for a Bergen County home in August was $645,900, up 10.4% from a year earlier,  according to New Jersey Realtors, a trade group for agents. In Passaic County, the median price rose 12.5% to $450,000. Prices jumped 12.3% in Morris County and a whopping 25.5% in Sussex County. 

That’s where patience and flexibility come in. 

Don’t fixate on one area

The Sevillas started in 2019 with an initial budget of $580,000 and an eye on Maplewood, Essex County, where they’d be close to family as well as bus service to New York City. Mass transit was crucial for Robert, who works as a senor broadcast producer in Manhattan. Laura is a clinical mental health counselor who travels throughout North Jersey.

After failing to find properties in their price range, the Sevillas extended their stay with Laura’s parents.  They expanded their search and discovered that homes in parts of Morris County were less expensive with lower taxes. They eventually focused on Morris Plains, where Midtown Direct train service runs straight into Manhattan on weekdays.    

“This is the town we were looking for,” Robert Sevilla said. “It has a town pool, a downtown and train.”

After raising their budget to $625,000 and then to $640,000, they proceeded with their hunt with a buyer’s agent that knew the town. Robert was pessimistic. He’d been outbid by $100,000 or more when the couple looked at homes in Maplewood.

But living with Laura’s family gave them more flexibility, since they weren’t bound by a lease.The Sevillas searched through the summer and found a house that was cosmetically challenged and had gone without an offer for more than a month.

The price for the split-level in a tree-lined neighborhood along Grove Avenue started at $640,000. The couple bargained it down to $612,000 and scheduled a closing for the end of October.

Timing, timing, timing

Real estate is all about location, location, location, the saying goes. But timing may be just as important. 

Christian Altenkirch learned the hard way when he dawdled in making a purchase in Bergen County.

“I wish I bought in 2019” – before the pandemic housing squeeze, said Altenkirch. Since then, he’s been shopping for a home with his wife, Erika, for two years.

It didn’t start out as a monumental task. The couple wanted a starter home – nothing fancy – within commuting distance to Manhattan, so Erika may work as a dressmaker after taking some time off. Christian works at his family’s packaging manufacturing business in Hackensack.

With a budget of up to $500,000, they looked in Westwood, Ridgewood and Park Ridge. Then COVID hit last March, temporarily halting the market. When sales resumed a few months later, real estate was in a frenzy.

“You had people flocking from New York City with a lot of money,” said Altenkirch, 46. “Bergen County is expensive to begin with. It’s really a setback for us.”

The couple, who have a 20-month-old baby, have been renting in Hackensack and waiting for a lull in the market. 

Inventory remains low in their price range, so they continue to rent and save. And wait.

 “I don’t want to wake up and regret the decision I made,” Altenkirch said.

Inflation and scarcity

The increase in housing prices during the pandemic is forcing many first-time buyers to stretch financially. There’s no sign that prices will return to pre-pandemic levels, even as the market returns to a more normal selling cycle.

There’s still a scarcity of homes for sale, said Jordan Kaufman, a partner at Green Ridge Wealth Planning in Montville. That’s especially true in Bergen County, where price  appreciation is above the national average. 

“The perception that it’s a good investment makes it a good investment,” said Kaufman, who lives in Ridgewood. 

Every person’s financial situation is different, but a general rule of thumb is to save more than you earn and curb spending to build a nest egg for large purchases such as homes and college tuition, Kaufman advised. 

Would-be buyers need to save enough to set aside for a down payment, escrow and closing costs. That could amount to $78,400 for a $600,000 house with 10% down and a conventional 30-year mortgage, according to The Mortgage Reports, a real estate blog. 

It’s better to get into the market sooner rather than waiting to set aside a bigger down payment, said Jeff Fellers, an agent at KL Sotheby’s International Realty in Mendham. 

“It has always been extremely difficult to keep up your savings with the rate of inflation and the escalating home prices,” Fellers said.

A loan insured by the Federal Housing Administration may be another option for first-time buyers. FHA loans require lower minimum credit scores and down payments than many conventional mortgages. With a credit score of 580 or higher, for example, the minimum down payment is 3.5% of the sales price.

Fellers advised shoppers to get their finances in order before starting the house hunt. Have a lender run a credit check on yourself and submit underwriting documents. Prepare to provide a strong down payment. When writing an offer, limit inspection issues to major and mechanical problems and avoid cosmetic concerns, he said. Be flexible with the closing date.

“In this market, it is very difficult to attempt to purchase a house subject to the sale of any other real estate,” Fellers said. “The market does not tolerate that.”

Patience in buying

Walking around their soon-to-be new neighborhood with their daughters, Robert and Laura Sevilla reflected on their homebuying journey. Many sacrifices were made to make it happen, and there will be many more weekends spent on improving the home.

Living with her parents “was a little difficult because it’s a lot of people in one house,” said Laura Sevilla, 37. “But my parents were great. [It was] probably a little harder for Robert since they are not his parents, but he understood that we were sacrificing now but that the end would justify the means.”

Robert Sevilla said he’s glad the house hunt is almost over. After being outbid a half dozen times, he learned that waiting is part of the process of buying in a hot market.

“Be patient,” he counseled other first-timers. “All hope is not lost. There’s always another house.”        

Mary Chao 趙 慶 華 covers the Asian community and real estate for NorthJersey.com. To get unlimited access to the latest news out of North Jersey, please subscribe or activate your digital account today.

Email: mchao@northjersey.com