Note: This is from an interview with Todd Hatfield, vice president of consumer and mortgage lending for Granite Credit Union.
What lies ahead for those looking to buy their first home? There’s a range of viewpoints and opinions from Realtors, lenders and builders, but one thing is clear: The future remains fluid.
Todd Hatfield said the two largest issues right now in real estate are affordability and inventory, or lack thereof.
“For a first-time homebuyer, where the prices were once about $350,000 and the rates were like 4 percent, that’s all changed now to maybe a $550,000 house at 6 1/2 percent. So the biggest question I get asked is ‘how do we combat that?’” he said. “What is the outlook for Utah? I’ll be honest, I don’t have a very good outlook on that. Those costs don’t seem to be relaxing.”
He said that while interest rates are falling a bit, that is bringing more buyers into the market. With limited inventory for first-home buyers, demand causes prices to rise.
“It’s a cycle, and a lot of lenders are trying to find ways to help,” he said. “At Granite, we’ve come up with programs for first-time buyers like a permanent buydown. They have to qualify at 80 percent for their area medium income, about $93,000, but it can give them a 30-year mortgage with a lesser interest rate, as much as 2 percent. We’re looking at things like that which we can do.”
Hatfield said it’s kind of a crazy cycle right now. Homebuilders can’t seem to finish homes fast enough and still make them affordable for people. It’s one reason why many builders have gone to townhomes or condominiums to help meet the first-home demand. It also addresses the increased demand for water, as fewer lawns and gardens lessen water consumption.
He said that even though building prices for materials have come down over the last two years, builders don’t want to lower prices and hurt the values of the homes already in those
neighborhoods.
“For places outside Salt Lake City, like in Lehi or Tooele, people who are willing to commute so they can get into their first homes are making purchases,” he said. “It really depends on their willingness to spend more time in their cars and weighing that against having a home. Many feel it’s worth it.”
Hatfield added that many parents are selling their homes then using their equity to buy a larger home where they can live with some of their children.
“I always caution first-time buyers that just because I can qualify them for a mortgage doesn’t mean they should do that mortgage,” he said. “They need to know their living expenses and look at that, as well as their ability to budget. It’s great to build equity and not pay rent, but only if it makes sense.”