Once upon a time, way back in 2006, first-time homebuyers could purchase a new house with relative ease. The process was predictable — perhaps even enjoyable.
“The conversation used to be, ‘We’re going to see eight or nine houses over the weekend, and then we’ll talk about what you liked,” says Marguerite Martin, a real estate agent with Windermere Partners in Tacoma. “Now it’s more like, ‘We’re going into battle. Stay close to me, and we’ll get through this.’”
The difference? A severe inventory shortage throughout the Puget Sound region, coupled with a lack of new construction in some South Sound counties.
“We’ve had less than a month’s worth of inventory for the last six months, which is historically low,” says Patty Miller, an Olympia RE/MAX agent. “In a balanced market, we typically have nine months of inventory. Now, we’re seeing bidding wars for single-family homes. I listed one last week for $348,000. For every house, you’re really competing.”
Compounding the issue, new residents continue to flock to the South Sound, but construction is not keeping up with demand. In Thurston County, regulations concerning the Mazama pocket gopher have created a backlog of projects, while in Pierce County, building has also slowed.
“We’re about 10 years behind on new construction,” says Anna McClusky, owner and broker at Keller Williams in Pierce County. “Some of what we’re seeing is a side effect of new homes needing to be built. People are continuing to pour into the state.”
Not all newcomers are from out of state. Due to the housing crunch farther north, more buyers from the Seattle market are crossing county borders looking for affordable homes.
“We’re seeing people moving further south into areas like Graham, Roy, and Eatonville,” says McClusky. In a chain reaction, more Tacoma-area buyers are moving into Thurston County.
“It’s all trickling down,” says Miller. “If we don’t get more affordable housing soon and bidders can’t catch up, we’re going to see a surge of people moving to Lewis and Mason counties.”
The effects are visible even in the secondary market of vacation homes, says Linda Hodge of Van Dorm Realty in Olympia.
“A waterfront home or a cabin on a lake that costs a million dollars here would be $3 million to $4 million in Seattle. The South Sound looks like a better option.”
Despite these challenges, local agents believe it’s possible to find a home if you strategize.
“I helped several first-time homebuyers recently,” says Hodge. “An important piece is following some guidelines to make the process better and make them more competitive.”
Martin recommends working with an agent who is well known in the area and specializes in buying.
“Relationships between agents have become especially important,” she says. “Out of 15 offers, four or five are going to be essentially the same. It may come down to the seller’s agent knowing that your broker is someone they’ve worked with before who does a good job.”
Having your paperwork in order may be a determining factor in who gets a home, so it’s important to have an agent who knows how to fill everything out correctly, she notes.
Working with a local lender can also expedite the process, says Hodge.
“Be pre-approved, preferably by a respected local lender. If it’s someone the seller knows and trusts, that adds some weight to the offer.”
She also recommends two forms, an Escalation Clause Form and a 22AN Low Appraisal form, that can give buyers a leg up on the competition. The former predetermines how much higher a buyer is willing to go if the seller receives a higher offer, and the latter provides the buyer with the option to terminate if the appraisal is lower than expected.
Having cash on hand is always a plus, whether through borrowing or saving in advance.
“If sellers are getting multiple offers, odds are one of the buyers is going to have cash,” says Miller. “Buyers should be saving up, so they have some ready money in the event of finding a home they really love. That may be the only difference between them and another buyer.”
Some programs minimize the amount a buyer asks a seller to contribute to closing costs, which can also be a plus, she emphasizes.
Even with cash, it may be tough to compete against the number of investors who are increasingly entering the market, according to McClusky.
“One of the biggest conflicts is with international buyers who are coming in with cash offers that you just can’t beat. If the offer is above $290,000, you still have a chance of winning a bid, but if it’s below that, there’s nowhere else to go.”
Some potential buyers have begun waiving home inspections in a bid to make their offers more attractive.
Hodge warns against such tactics.
“We would never recommend buying a home without an inspection,” she says.
A better approach would be to get an inspection scheduled for within a few days of submitting an offer, McClusky suggests.
But above all, first-time homebuyers should not give up, says Martin.
“It’s hard out there, but it’s not impossible. Find a good lender and a good agent, get your dream team together, and know that you can still achieve that dream. Also know that it’s a lot of work, so be ready.”