By now we’ve all heard countless stories about Buffalo’s residential real estate market and how competitive the home search has been for first-time buyers. A shortage of properties for sale, multiple offers, and buyers digging deeper than what’s financially prudent, at times, to finally win a bid. But for homebuyers whose pocket linings only reach to a depth of about $100,000, the search for a place of their own has been testing nerves, generating disappointment and pricing people out of long-term financial stability.
Belmont Housing Resources for WNY is one of a handful of local non-profit agencies that offer first-time homebuyer counseling, working with about 500 people each year. Housing Programs Manager Sandra Becker, who has been in the home buying field for over 25 years as a realtor and then a housing counselor, has seen skyrocketing home prices have a dramatic impact on who is seeking assistance.
“We used to help very low-income people—under the 30th percentile—buy houses, and that’s not happening anymore,” she explains. “We’re struggling with people at the 80th percentile now.”
Becker also says that in the past year the agency has seen a decline in the number of people attending the homeownership classes offered at Belmont Housing Resources because there are simply fewer people who can afford to shop—and that’s not likely to change soon.
“The home prices have leveled off, but now the interest rates are rising,” says Becker. “If someone was making $40,000 and would’ve qualified for a $120,000 house at 4 percent interest, at 5 percent it’s $73 more per month to a mortgage payment, which brings their qualification down to $106,000 for a house. With higher home prices, it’s less possible to find that house.”
So who is looking to buy? Becker says the majority of first-time homebuyers are in their late 20s or early 30s. Half are single mothers. There has been an increase in refugees buying because there is a big community here that supports one another in homeownership. Less common but still seen are older people who have rented their whole lives and have saved up enough to buy.
Tamika Collins-Murphy, a real estate agent with Howard Hanna, has helped some of Belmont’s clients search for a home. She says that in today’s market, buyers really need about $125,000 to find a good home. Even at that price point, the search can be disappointing.
“Everyone starts off wanting the same things as buyers in any price range—an updated home with plenty of space within the city, close to shopping and places they could walk and things to do,” she explains. “Unfortunately in the city and surrounding areas, there are older homes. And in their price range, and when they go for mortgage pre-approval, they can’t qualify for enough. It’s a wakeup.”
The good news? “There are homes out there,” said Collins-Murphy, especially in re-emerging neighborhoods.
Rashada Stewart worked with Collins-Murphy to shop for her first house this winter. She had recently gotten married, had been saving for a house, and started a job where she saw herself staying long-term. Her budget was under $130,000 through a first-time homebuyer mortgage program, and her year-long search took her through several areas of the city where the neighborhoods were good and amenities were nearby. She walked through 15 houses total, put in offers on six, and won three of those bids. But two of the homes failed inspection due to a variety of issues. The final home, a three-bedroom in North Buffalo, became hers in mid-February.
Collins-Murphy and her partner, Howard Hanna Real Estate Agent Mia Mootry, say that while it’s very slim pickings for affordable houses in high-demand neighborhoods, there are pockets all over the city where solid homes under $125,000 do pop up for sale. Hamlin Park is an area that’s up-and-coming, diverse, and not too far from downtown. They’re seeing more options in the University District, Riverside, Blackrock and Kaisertown. Mootry says that South Buffalo is full of homes with beautiful woodwork and character. Around the Medical Campus, homes are priced low (although sometimes need a lot of work).
The obvious choice might be to opt for a fixer-upper, but while the home itself might carry a lower price tag initially, the costs to repair and renovate add up quickly. Many first-time homebuyer mortgage programs also require a home to be in suitable condition at purchase, and don’t allow a buyer to borrow extra to put towards rehab.
For homes that do qualify for a mortgage but need a little help, Collins-Murphy urges her clients to see the home’s potential—and the resources available to help pay for improvements.
“If a home has almost everything else on the list, maybe we talk about applying for an FHA 203k improvement loan, which lowers out-of-pocket costs and then they can make it what they want,” she explains. “There are grants available after you’ve lived in a place for a while to make improvements in certain areas of the city—a new furnace or new windows, for example.”
For now, Belmont Housing Services tries to layer as many financial resources as possible into programs for its homebuyers. This includes combining grants from the city, match-savers programs and closing cost assistance on fixed-rate mortgages from State of New York Mortgage Agency-approved lenders. The organization also strongly favors local lenders’ products for first-time and low-income buyers because the smaller institutions tend to have more options that extend the borrowing power of the buyer. For instance, a local credit union might waive mortgage insurance, a savings of $75 per month which, when subtracted from average monthly mortgage payments, means someone might be able to afford a house that costs $15,000 more.
In the end, Stewart says, the year she spent shopping and bidding was challenging, but ultimately worth it.
“First it was fun going to open houses and looking around,” says Stewart. “But then putting in offers and not getting the houses was frustrating. My first expectations were higher, and there were compromises along the way. We ended up with a house that checked most of my boxes; it just needs a little paint, but nothing major.”
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