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First-time buyers frustrated as housing market stays hot

When Jennifer Mueller decided it was time to buy her first house, the 31-year-old Kenmore renter wanted to be careful and do it right.

So she signed up for a first-time homebuyer program through a local bank, got prequalified for a mortgage, and found a real estate agent.

That was 15 months ago. Since then, she has looked at 20 homes, and lost out on two different houses – including one that went for $3,000 more than asking.

Buying your first home just isn’t what it used to be.

Western New York’s housing market has been hot for the past two years, setting records for home sales and prices. Competition has been fierce in popular areas, with some homes going to contract within hours of being listed. And inventory has fallen to unusually low levels, narrowing options for choosy shoppers.

So first-time homebuyers in certain neighborhoods in Buffalo and suburban communities have found themselves missing out, priced out or beaten by cash bids and multiple offers over asking prices.

That has created a lot of uncertainty and frustration. After long hearing how easy and affordable a home purchase can be in Western New York, they’ve instead found slim pickings, rising costs and a need to act fast, with more cash.

“It’s affordable, in the sense that interest rates are so low and you can get a pretty good mortgage,” said Michael Gospodarski, an agent at Hunt Real Estate Corp. “But in order to buy something as a first-time buyer, you need a lot of money upfront, because the inventory is so low.”

That doesn’t mean that Buffalo is now expensive or overpriced. New data from national real estate research and media company Trulia found that Buffalo remains one of the nation’s most affordable markets, particularly for buyers seeking starter homes.

But the reality on the ground seems to feel much different. “Right now, you would think inventory would be pretty high, but it’s not at all,” Gospodarski said. “It’s actually pretty slim.”

Expanding search

Sara Kow-Falcone and her husband, David Hamilton, had been living in an Allentown apartment for seven years when the couple decided it was time to stop paying rent and buy their first home.

They knew they wanted to stay in Buffalo, but “we were priced out of Allentown,” Kow-Falcone said.

At first, they thought they would take their time, being choosy about where to live. But “another year’s rent is a lot of money,” so they looked “pretty aggressively” at eight to 10 city houses over the course of a few weeks, she said.

The pair was ready to put an offer in for one house that had been on the market for a couple of months, but someone else suddenly put it under contract. So when they saw a 1,500-square-foot ranch on Lisbon Avenue on the West Side that had just been renovated by a husband-and-wife team, they jumped with a fully priced offer.

“We didn’t expect as much competition. It’s more of a seller’s market,” said Kow-Falcone, a 32-year-old restaurant server and actress from California. “All the good pieces of property will have multiple offers within a short period of time. We knew we had to move very fast.”

Brokers agree.

“It’s been a very, very fast market for first-time homebuyers,” said Annabelle Aquilina, another Hunt broker.

Steve Freitas, a Toronto native who now works as a technician at Gates Vascular Institute, spent eight months looking for the ideal home before settling on a three-bedroom Cape Cod on Parker Boulevard in Town of Tonawanda a year ago for $145,000. “There were definitely a lot of choices, but I was looking for something that was kind of turnkey, where it didn’t need a whole lot of extra maintenance,” he said.

At first, he wanted to live downtown, but “they’re asking $200,000 for houses off Richmond, and they’re complete fixer-uppers.” He looked at the Hertel Avenue area as well, but those houses also ran in the $160,000 to $200,000 range, and still “need a lot of work.”

So he turned further north to Kenmore and Tonawanda, where “the prices are going up, but they’re still within reach.” Yet in the eight months he spent looking, he surmised, prices rose about 10 percent.

Frustrated with buyers

Some first-timers have unrealistic ideas. “A lot of these first-time homebuyers have this expectation that properties should be extremely cheap, which they’re not,” said Christopher Naugle, co-owner with his wife, Lorissa, of LC Strategic Realty, a house-renovation firm that has resold 62 houses in the last 19 months – half to first-time buyers. “They’re watching too much TV and they think they can get everything for nothing.”

Many first-time buyers also aren’t prepared to do a lot of work on their new house. Rather, they expect it to be in perfect condition, ready to occupy, or they will demand that the seller take care of even minor issues before they will close a deal. “They think the home inspection is a way to do the home renovation for them,” Naugle said. “I’ve canceled many contracts, because I’ve been upset with them. They come back with three pages of things, I mean, the silliest things you’ve seen in your life. These are things that the Realtor should be telling them will cancel the deal. And at that point, I don’t want to negotiate with them.”

Price shocks

Buffalo’s population of young professionals aged 25 to 34 is on the rise for the first time in decades, growing by a third from 2000 to 2012 – the eighth-fastest rate in the country. And urban living is in vogue again, especially for younger workers and empty-nesters.

But the inventory of homes for sale hasn’t kept pace. So even though a near-record number of homes went on the market last year – 18,560, to be exact – the tally of for-sale properties is now at its lowest level in 12 years.

As a result, the area’s median home price – which has been steadily rising year after year for at least the last 20 years, even through two recessions – grew to nearly $125,000 last year, up from about $79,000 in 2000. The average price rose to almost $150,000 from $94,000 in the same time period.

That’s great news for sellers and the overall economy, but it’s bad for cost-conscious buyers. According to data from research firm CoreLogic, prices in Western New York rose 5.6 percent in the last year, faster than the long-term local average of less than 3.5 percent. “It’s potentially running a little too hot and faster than we’d like to see,” said economist Ben Ayers, of Nationwide Economics in Columbus, Ohio. “It’s starting to get a little bit concerning for us. Are people being pushed out of the market because they’re not able to afford prices there?”

Real estate agents and buyers say neighborhoods like the Elmwood Village and Allentown, which were already considered trendy and popular, have quickly become almost unattainable, while the Delaware District and North Buffalo are becoming more expensive than buyers are willing to pay. That’s now spreading to areas like the West Side or Black Rock, and to parts of the East Side, as buyers look further afield from their desired locations.

“The inventory is low, therefore what is available is higher than what it should be,” Gospodarski said. “If you’re working with buyers, it’s just frustrating not being able to find them something in their price range.”