High rent near the University drove finance and entrepreneurial management junior Alex Ablamunets to take out loans and make a joint purchase of a Riverview Tower condominium on the West Bank in September 2005.
Ablamunets and his roommate were able to get low financing, making his $450 monthly payments comparable to average rent.
A high number of homes for sale on the market and near 40-year-low mortgage rates are attracting buyers who may have previously rented.
That means for some young, first-time buyers with money in the bank – or with parents who have some – now looks to be the time to buy property.
The shift toward a buyer’s market comes after a five-year housing boom in which buyers were attracted by low interest rates and sellers and developers could demand higher prices.
Tom Blomberg, a broker for Prudential Sundial Realty Incorporated, said from a practical standpoint, the real estate market turn-down is fairly minor.
“It’s made pricing for buyers better. It’s made competition better,” he said. “So, I think in the end, it helps to give the market some strength from which to start going back up again.”
Glenn Dorfman, chief operating officer for the Minnesota Association of Realtors, said graduates looking to buy now, this spring or summer are in good shape.
“It is clearly a buyers market,” he said. “It has been for the last 15 months.”
Ablamunets, a licensed real estate agent and co-president of the Real Estate Club, said parents and students should take advantage of the buyers market instead of paying high rent into someone else’s pockets.
“Students can get financing. We had barely any income to show and they still financed us at a low rate,” Ablamunets said.
Walter Molony, senior public affairs associate for the National Association of Realtors, said the current market is more buyer-friendly than any other period in the past 13 years.
“For basically five years. there was no motivation for sellers to help buyers. Now there is,” he said.
Unlike conditions during the real estate boom period, sellers recognize the need to negotiate prices and terms, because the number of homes for sale exceeds the number of buyers.
“The advantage for a first-time buyer is we’re seeing a lot of incentives offered in the market both in terms of price cuts and in terms of helping a buyer with down payment and closing costs,” Molony said.
Early this year, the 30-year fixed-rate mortgage was expected to rise to about 6.9 percent, but dropped unexpectedly to near 6.3 percent, Molony said.
“We’ve got historic lows in interest rates and you’ve got a situation that’s much calmer,” he said.
That means buyers can watch the market, look for owners struggling to sell their property and negotiate.
Molony said most first-time buyers can handle monthly mortgage payments. But coming up with the cash for down payments or covering closing costs may be a challenge.
“If you can get the seller to help, that may mean the difference between renting and owning,” he said.
Alex Stoewer, finance and entrepreneurial management senior and president of the Real Estate Club, bought a duplex unit in January 2005 with the help of his parents as co-signers to get a better mortgage rate.
Based on market conditions, Stoewer said financially stable students and graduates planning to live in the Twin Cities area for another five years should look for homes or condos in the $200,000 price range.
“You can really bargain somebody down because there aren’t that many buyers out there,” he said. “You can really beat somebody up on the price and you can still get a really reasonable rate.”
