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24 | M R EP O RT COVER STORY portant for everyone to communi- cate and be proactive and flexible, but we are optimistic about the industry over time. What advice would you give to a first-time buyer intent on buying a home in this current economic environment? Blomquist: Over the next 12 months, first-time buyers will likely have a better window of opportunity for purchasing a home than they have in the last decade. This does not mean a total fire-sale opportunity as we saw back in 2009 and 2010, but buyers may still lose some equity in the short term in exchange for buying near the bottom of the market. This window of opportu- nity is ideal for buyers who plan to live in the home for at least five years and who can comfort- ably afford the monthly house payment. In other words, they are not severely stretching their finances and quality of life just to take advantage of the window of opportunity. Dr. Deitz: It is a buyer's market now, but a frustrating one due to low affordability attributable to higher interest rates. I would advise first-time buyers to expand the geographic area of their search, given the proliferation of new work-from-home options. I would also advise them to consider a townhouse or other light-touch density housing. They should be prepared for competition to increase in 2024 when interest rates will increase (a good thing), but buyer competition will grow again. Hale: It can be a good time to buy a home even in challenging market conditions if it is the right time for you. Given the housing and economic shifts that are ahead, setting yourself up for success means sticking to your budget and making sure you have a savings cushion left over for emergencies even after the home purchase. In this environment where home prices are high and mortgage rates have upped the cost of buying, I know this is hard to do, but it is important. When you are shopping, keep in mind that you want to find a home that will fit your needs not only today but also for the next five years or so. In other words, think medium term. You want a home that will last beyond the short term, but your first home does not have to be your forever home. Kushi: I think millennials have already been renting longer simply because of lifestyle choices. So, everyone is getting married later, having kids later, and deciding to buy a house later. They also have more student loans paid off on average, so we found that that tends to delay, rather than prevent, homeownership. There are a lot of homes in the pipeline for builders, so that will be new net supply added to the market, which will take some of the pressure off house prices. We are still underbuilt even with all those homes in the pipeline. New homes only comprise approxi- mately 10%-12% of total inventory, so the bulk of inventory is exist- ing home inventory. Until those existing homeowners sell, we will still be under-supplied. When we get through this point in the housing cycle, rates may be stabilized and house prices may be stabilized, and all that shadow demand that you have from millennials, who right now are a little too nervous to jump back in. I think they will have more supply to work with than during the pandemic, which I am sure will be welcome news and some relief for them, but we have not been building in that starter-home price range, so I still think it will be competitive at that price point. The interesting thing, though, is that millennials have been historically skipping that starter-home price range. We saw over the pandemic that they are going from the three- to five- year home, which is traditionally what a first-time homebuyer does, and skipping right to the forever home. Dr. Lautz: This is a moment in time when first-time buyers may have an opportunity to enter the market easier than over the last two years. There was a frenzied pace in the housing market, which had pushed first- time buyers, often with FHA or VA mortgages, to the sidelines. As some buyers have retreated, high-income, first-time buyers may take advantage of the market right now. Rood: Do not overreach. Have a budget and stick to it. You may have to "drive until you comply" to find homes in your budget, but if you are in an industry where you can largely work from home, seek out secondary and tertiary markets for better value. Sharga: First, make sure your household finances are in order and that you are ready for the kind of financial commitment that homeownership demands. Do not overextend yourself to buy a home. Second, ask yourself if you are buying a home with the intention of staying there for more than the next year or two—that way you can weather the storm of possible home price fluctuations. Then, if you can find a home that you like and can rea- sonably afford, buy it! Mortgage rates are likely to go back down into the 5% range in the next year or two, and you may be able to refinance into a better loan than the one you will take out initially to buy the house. For most (not all) families, homeownership is still a better long-term option than renting. Waiting for home prices to "crash" usually is not a great strategy, and it is highly unlikely that we are going to see prices plummet in most markets over the next few years. "This is a moment in time when first-time buyers may have an opportunity to enter the market easier than over the last two years." —Dr. Jessica Lautz, Deputy Chief Economist and VP of Research, National Association of Realtors