Yet buyers are still blowing through their budgets by ever-higher amounts to lasso their dream homes, according to a recent survey by Owners.com, a real estate brokerage.
The finding shows that even in a more buyer-friendly market with more choices, many shoppers still struggle to land the house that meets their needs.
“Finding the right house is still very challenging,” says Dario Cardile, vice president of growth at Owners.com. “To get quality, they need to go up.”
Thirty-eight percent of home buyers topped their spending limits, up from 32% a year ago, according to the March survey of 1,800 home buyers who made a purchase within the past four years. And they busted their budgets by an average $20,000, up from $16,510 in the early 2018 survey.
“People are going above their budgets more than we expected,” Cardile says.
Among the reasons more buyers are splurging: Despite the cooler market, prices are still climbing and inventory remains relatively low, especially in large coastal cities.
There were 1.83 million existing home listings in April. And while that total is up from 1.67 million a year earlier, it remains below a normal level, according to the National Association of Realtors.
The median price was $267,300, 3.6% higher than in April 2018. Although that price is still rising, it's less than the 5% to 6% annual price gains a year earlier. Meanwhile, Americans’ average pay increases have accelerated above 3%, seemingly easing the financial strain.
Competition for houses has also eased. Clients of Redfin who made offers on homes faced bidding wars 15% of the time last month, according to the real estate brokerage. That was down sharply from 60% a year earlier.
But it’s still not easy to snag that ideal house in a good neighborhood with top-notch schools that’s a short commute from the office, Cardile says. About half the buyers surveyed said finding the right home was the most challenging part of their house hunt, more than those who cited saving up for the down payment.
John Frazier, 71, hunted for a one-bedroom condo in downtown Philadelphia for weeks early this year but found nothing suitable within his $250,000 price limit.
“We looked at a bunch of places but couldn’t find anything where I wanted to be and what I wanted,” says Frazier, who was moving with his partner from an apartment in midtown Manhattan to take a part-time public relations job in Philadelphia. Some units were too far from his preferred Center City neighborhood while others were older and needed work.
So Frazier increased his cap by $50,000 and quickly found a modern, top-floor condo for $300,000 with spectacular views and a health club, and within walking distance of shopping, his doctors and the city’s theaters. The unit had attracted other buyers, and so Frazier offered $5,000 above the list price. The owner accepted, and he moved in March 22.
“It was right, and that’s why I went the extra $5,000,” he says. “I wanted to shut off a bidding war.”
Although he’s spending about $200 a month more than he initially intended, the monthly payment is still within his budget, he says.
Among the different age groups of buyers:
• Thirty-nine percent of Gen Xers went over budget and by $35,000 on average, up from 34% who topped their spending limits by an average $13,996 a year ago.
• Twenty-seven percent of baby boomers busted their budgets by an average $25,000, compared with 19% who went over by $8,024 last year.
• More millennials surpassed their spending caps – 46% – up from 40% last year. But they cut the average amount they overspent in half to $12,000.
It’s not that millennials are being more frugal, Cardile says. If anything, entry-level homes favored by people in their 20s and 30s have posted sharper price increases than more expensive trade-up units. Rather, he suggests millennials increasingly are using online tools to narrow down their searches. As a result, he says, they’re savvier about the market, prompting them to set higher spending limits and exceed them by smaller amounts.
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Another factor is that just 41% of millennials said finding the right home was their biggest challenge, compared with 52% of Gen Xers and 56% of boomers. Many millennials are still single or childless and less tied to jobs, making them more willing to move to mid-sized markets to buy affordable homes, Cardile says.
This article originally appeared on USA TODAY: 'I went the extra $5,000': Despite a cooling housing market, buyers bust their budgets