First-time buyers have the tech-smarts and now the tools to do all or part of their purchase online, sometimes even before seeing their new houses in person.
When Kassi Horton’s husband, Army Staff Sgt. Shaun Horton, received a cross-country change in assignment in the midst of a pandemic, she knew their home-buying process would be atypical.
Ms. Horton, 27, and Sergeant Horton, 28, had been living in a rental in upstate New York and felt it was time to finally purchase their first home in their new location, Colorado Springs. But they didn’t want to deal with the health risks and quarantine rules involved with flying back and forth to look at properties. And they didn’t have the luxury of travel time, anyway: the housing market in Colorado Springs, like many cities across America, is currently white-hot, with homes selling hours after hitting the market, often at 20 percent above the asking price.
So they jumped on an increasingly popular bandwagon for first-time buyers and made an offer on a home they had never seen in person. Eight more offers followed. For the Hortons, the ninth time was the charm, and in late January they moved into a new three-bedroom, two-bath home that they purchased entirely online.
Record-low mortgage rates and a drastically low housing inventory, created by societal shifts from the coronavirus pandemic, have raised the stakes on the housing market in many places. But even if competition is fierce and the process often confusing, first-time buyers seem determined to enter the market, often accelerating long-established plans for homeownership.
The share of first-time buyers in the housing market reached 36 percent in April 2020, according to the National Association of Realtors, up from 31 percent in 2018 and 2019. And those buyers were older — the median age of a first-time buyer in 1981 was 31, today it’s 34.
Millennials — generally defined as those born between 1981 and 1996 — represent the largest contingent of home buyers in the United States. This is despite the fact that millennials are also much more likely to have lost work or have entered the gig economy because of the coronavirus pandemic, factors that make it harder to qualify for a home loan.
They’re also entering one of the most competitive housing markets in decades. The median sales price of single-family homes rose more than 10 percent in 88 percent of U.S. metro areas, pushing the monthly mortgage payment for a typical single-family home up to $1,040 this month, according to the National Association of Realtors. With extra low mortgage rates — currently below 3 percent — continuing to hold, mortgage applications for both home purchases and refinancing are way up.
At the same time, the stock of active listings on the market is 40 percent lower than it was one year ago. And in September 2020, more than 22 percent of all homes in the U.S. were sold above list price; that number was 15 percent in September of both 2018 and 2019.
But millennials have one extra tool in their shopping arsenal, and that’s their tech-savviness. According to an October survey from realtor.com, nearly half of millennial home shoppers were planning to buy a home sooner than expected because of the Covid-19 pandemic.
The increased pressure on the market has been coupled with widespread adoption of tech tools that allow buyers to not just browse real estate but also apply for loans, finalize deals and even have documents notarized, all while social distancing from their sofas. Sixty-three percent of buyers who used Redfin in November and December went on to make an offer on a home they hadn’t seen in person, and monthly views of 3-D walk-throughs on the site are up more than 500 percent since February 2020.
“In this market, because the homes are gone so quickly, if I had contacted the agent and set up a showing, by then they could have had five other offers,” Ms. Horton said.
The couple, whose budget was capped at $350,000, did use a broker in Colorado Springs. But rather than follow the traditional route of letting her choose homes for them to see, they went on virtual tours on sites like zillow.com and realtor.com and then sent the broker out to film video on their behalf. To vet the surrounding streets of an unfamiliar neighborhood, they checked local crime rates online, used Google Maps and looked up rankings of local school districts (the couple do not have children, but hopes to eventually).
After repeatedly finding themselves outbid, they finally made an offer that was accepted, and they signed all of their paperwork, with the exception of their closing documents, using DocuSign. (A number of states passed emergency measures during Covid-19 that allow for remote notarization, and 29 states currently have remote online notary laws on the books).
They arrived in Colorado to do a walk-through just before the closing process ended, knowing that if they backed out on their offer, they would lose their deposit.
“We were really hoping that when we saw it in person we would love it,” Ms. Horton said. And for the most part, they did — although despite their agent letting them know the home would need some renovations, they were surprised to find several damaged walls that hadn’t been shown online.
“But with the Colorado Springs market, we were really lucky just to have a bid accepted, and in the neighborhood where we ended up,” she said. “We were expecting to put some work into it.”
Some first-time buyers have resorted to online shopping after trying, and growing exasperated with, traditional methods of house hunting.
Ashlee and Ken Aiello, who are closing on their new home in Gaithersburg, Md., later this month, are among them.
“We didn’t plan on shopping from the computer,” said Ms. Aiello, 30, an assistant chemistry professor at the U.S. Naval Academy in Annapolis. Mr. Aiello, 39, works from home as a postdoctoral research scholar with Arizona State University.
Ms. Aiello was recently awarded a postdoctoral research fellowship in Gaithersburg, Md., which is about an hour away from their current rental. The couple decided to buy their first home in Gaithersburg rather than commuting from Annapolis.
“We were planning on doing it the traditional way, and we would drive down and look at a house every time we liked it. But the drive was wearing on us, and also the market is so hot that we knew that every time we saw a house we liked, we would have to drive down that same day if we even wanted to have a chance of getting a home,” she said.
