Buying Your First Home? Save, and Save Some More


Buying Your First Home? Save, and Save Some More

The dream of owning a home in New York City can seem unattainable, especially for first-time buyers in need of a hefty down payment.

Mark Hildreth and Caitlin Saloka spent years saving and paying down school debt in order to buy their first home. With help from Mr. Hildreth’s parents, they finally bought a one-bedroom apartment in the Fort George neighborhood of Washington Heights last year.CreditCreditGeorge Etheredge for The New York Times

One couple in Queens pulled thousands out of their retirement savings. The parents of a Manhattan couple offered up their home equity line of credit. And a mother on Long Island chose to work seven days a week.

As housing prices continue to outpace wage growth, it has become harder for first-time buyers to save up for the biggest purchase of their lives — especially those who want to buy in New York City, where the down payment alone can amount to hundreds of thousands of dollars.

“People will go to extreme measures to buy here,” said Jason Haber, a broker at Warburg Realty, a luxury agency in Manhattan.

There are the cutbacks. Eating out? Nope. Shopping? Definitely not.

Student loan debt needs to be paid down first or refinanced.

Sometimes a couple will set aside one person’s entire income for the down payment, Mr. Haber said. Other buyers can manage it only with multiple gifts from family members. “It’s almost like a GoFundMe,” he said.

According to an analysis by Social Explorer, a research company, first-time buyers in New York City — much like those in other large metropolitan areas — differ markedly from buyers in the rest of the country.

Many are well-educated, six-figure earners: 21 percent of first-time homeowners in New York City surveyed by the census in 2013 had earned a master’s degree or higher compared with 11 percent nationwide, and 40 percent earned more than $100,000, nearly double the percentage nationally.

And once they buy, they tend to stay put. More than 70 percent of the homeowners surveyed in New York City were living in the first home they ever bought, and more than half of those moved in before 2000.

But for many New Yorkers, regardless of income or education, saving enough to buy a home requires discipline and more than a little creativity.

Will and Heather Gallagher in the Jackson Heights, Queens, apartment they bought two years ago with help from a first-time home buyer’s program and money from Ms. Gallagher’s Roth I.R.A.CreditGeorge Etheredge for The New York Times

Heather Gallagher, 36, a fund-raiser at a performing arts center in Manhattan, and her husband, Will Gallagher, 34, who provides technical support and on-boarding at an education software company, started hunting in 2016 for a one-bedroom in Jackson Heights, the Queens neighborhood where they had rented for 10 years.

After being outbid on four properties, they found an estate sale in a co-op outside the neighborhood’s historic district, for $185,000.

The kitchen was in its original condition from the 1950s, including the oven, Ms. Gallagher said: “I was pretty sure it was going to kill us both.”

They also discovered that the refrigerator was missing. But the price was right.

They found a first-time home-buyer program at HSBC that offered to pay up to $7,000 in closing costs, and pieced together a down payment using their savings and $5,000 from a Roth I.R.A., withdrawn without penalties.

Their bid of $187,000 was accepted, but when the appraisal came in at just $178,000, they negotiated the price down to $185,000.

“So at that point, our parents gave us a gift,” Ms. Gallagher said, which they used to pump up their savings account ahead of the co-op board application. They repaid their parents after closing in March 2017.

The kitchen needed a gut renovation, but the Gallaghers couldn’t afford the $30,000 price tag. After moving in, they did what they could, replacing the refrigerator and oven, painting the cabinets and covering the floor with vinyl tiles.

By the summer of 2018 they had saved $15,000 for a new kitchen. The couple charged the rest to a Home Depot credit card that would remain interest free for two years, at which point they plan to have paid off the balance. This month, the work was finally completed.

“We have a dishwasher for the first time in our adult lives,” Ms. Gallagher said.

Queens has long been a more affordable option for first-time buyers, although the borough is starting to catch up to Manhattan and Brooklyn. In the past year, prices there grew by 3 percent, said Nancy Wu, a data analyst at StreetEasy.


Guerline Cadet bought a house in St. Albans, Queens, by working up to seven days a week and spending less on food, clothing and travel.CreditGeorge Etheredge for The New York Times

Guerline Cadet, 44, a law enforcement officer who recently bought a home in the St. Albans neighborhood of Queens, sometimes worked seven days a week, picking up overtime and security detail gigs to build up her savings.

About a decade ago, she bought a two-bedroom co-op in nearby Glen Oaks, but after years of increasing maintenance fees she decided to sell. She moved to Elmont, N.Y., on Long Island, and rented while scoping out various areas where should might buy a house for herself and her son, who is now 19.

“I wanted more freedom as a homeowner,” she said.

She made about $30,000 in profit after selling her co-op, a fraction of what it would cost to buy a house. But in 2016, a four-and-a-half-month overseas assignment in Haiti, where she was born, helped Ms. Cadet save far more. With housing provided and food relatively inexpensive, she kept to a budget of about $100 a month.

Encouraged by how much she was able to save, she said, when she returned to the United States, “I pretty much changed my way of life.”

She started cooking more and brought her lunch to work every day. She also cut back on eating out with friends, traveling and shopping for things like shoes and designer bags, past purchases “which I totally regret,” she said. “But you learn, you live and you learn.”

Soon she had saved up tens of thousands of dollars and was ready to buy, focusing her search on New York City.

In 2017, she paid $355,000 for a two-bedroom, two-bathroom house in St. Albans, where property taxes were lower than those on Long Island, and the commute to work was shorter.

“People don’t need that much — just the basics — to live,” she said. “The money we spend on things — clothes, shoes — it’s unnecessary.”

About 70 percent of New York City’s residents are renters. And a recent StreetEasy survey of 2,550 New Yorkers across all five boroughs found that 66 percent of renters plan to continue renting. One of the top reasons: They can’t afford to buy.

First-time buyers nationwide face similar hurdles.

“If you look at the housing market seven years ago, or eight years ago, qualifying for a mortgage was something more top of mind, because credit was so tight,” said Cheryl Young, a senior economist at Trulia. But recently, saving for a down payment has become a more primary concern.

According to a recent national survey by Trulia, 56 percent of people between the ages of 18 and 34 said saving enough for a down payment was the biggest barrier to homeownership, followed by rising home prices. Other top concerns included poor credit history and student loan debt, both of which can make it difficult to get a mortgage.

These problems have helped push the median age of home buyers to 46, the oldest age ever recorded by the National Association of Realtors. When the organization started collecting this data in 1981, the median age was 31. But millennials ranging in age from 25 to 34 make up the largest share of home buyers, and the median age for first-time buyers has remained around 30 to 32 for over 20 years.

“The best advice I give younger New York City residents is to try and make money like a New York City professional, but spend like you’re still a college student,” said Robert Stromberg, who works with six-figure earners in their 30s and 40s at his financial planning firm, Mountain River Financial, near Philadelphia. “If you don’t want to adjust your spending, well, then you’re left with just earning more.”

For first-time buyers Mark Hildreth, a construction manager, and his wife, Caitlin Saloka, a global account supervisor for an advertising firm, both 28, their debt made it difficult to save for a home.

“We blew most of what we had on a wedding in 2014,” Mr. Hildreth said. They spent the next year paying it off while also trying to pay down student debt.

Mr. Hildreth’s parents used their home-equity line of credit to help Ms. Saloka refinance her loans, reducing her interest rate to 3.5 percent from 12. Mr. Hildreth, who recently began pursuing a master’s degree at Columbia, had several school bills of his own.

He found a better paying job in 2017 and skipped retirement savings to save for a down payment. Ms. Saloka also got a raise that year, and they continued to live in the $1,350-a-month rent-stabilized apartment in the Fort George neighborhood of Washington Heights that Ms. Saloka found about seven years ago.

“Anytime we would get money that we weren’t expecting, whether it’s a $100 birthday gift or a relative passing away or a bonus at work, we would invest that money,” Mr. Hildreth said. By the time they were ready to buy, they had paid down about $70,000 of their $100,000 in loans and graduate school expenses.

Their broker showed them a renovated one-bedroom apartment, with an open floor plan, that hadn’t yet hit the market, right across the street from where they had been renting.

“This place kind of fell in our lap,” Ms. Saloka said.

They negotiated the $409,000 asking price down to $400,000.

Mr. Hildreth’s parents agreed to cover half of the 20 percent down payment. For the other half, “we were grabbing every bit of money that we had lying around,” Mr. Hildreth said, including a stack of savings bonds from his grandparents worth just under $3,000.

They closed in February of last year.

First-time buyers have also had success building their savings through investments, thanks to the bull market of the last 10 years.


George Parson gave his savings to a financial planner, who helped his money grow. He bought his first home in Washington Heights last year.CreditGeorge Etheredge for The New York Times

George Parson, 31, a process engineer at a snack-food company in New York City, became the first in his immediate family to own a home after giving $50,000 of his savings to a financial planner who nearly doubled it in four and a half years.

He considered using the money to travel, one of his passions. But he decided to buy a one-bedroom apartment in Washington Heights instead.

Mr. Parson grew up in the Bronx, where his mother rented “her whole life,” he said. “If I decide to have children, I want to give them something better than what I had. I figured it was one of the last pieces of Manhattan where I could afford to live comfortably.”

As of January, the median home price in Manhattan was just under $1 million, about four times the national median. And the amount needed for a down payment is especially high for New York City buyers, in part because much of the housing stock is co-ops that require at least 20 percent down, eliminating the possibility of using low down payment loans backed by the Federal Housing Administration or the Department of Veterans Affairs.

In the third quarter of 2018, the median down payment in New York City was $177,000, according to ATTOM Data Solutions, a real estate data company. By contrast, the typical first-time home buyer in the United States put down $15,878 in 2018, said Guy Cecala, the chief executive of Inside Mortgage Finance.

But one bright spot for New York buyers, especially those in Manhattan: Inventory keeps climbing and staying on the market for longer periods of time, making it easier to negotiate.

At a recent StreetEasy event that drew hundreds of first-time home buyers from around New York City, Ms. Wu told the audience that Manhattan home prices fell 4 percent between January 2018 and January 2019. And in Brooklyn, price growth has remained fairly stagnant for the past year.

“Right now, there are so many more discounts than there have been in the past,” she said.


Fernando Gonzalez and Alex Novack in their new apartment in NoMad. Income and bonus money helped fund their down payment, but they also managed to save by finding a cheaper rental and cutting back on eating out.CreditGeorge Etheredge for The New York Times

Alex Novack, 37, a real estate broker at Sotheby’s, and his husband, Fernando Gonzalez, 36, who works at a private bank, used that to their advantage when they began hunting for their “forever home” last summer.

Neither of them were first-time buyers, having each bought apartments in Chelsea before they met. When they married in 2014, they were renting a two-bedroom, two-bathroom apartment in Williamsburg, Brooklyn.

“You get to a certain point where, no matter how much you love your space, you want to make little changes,” Mr. Novack said. But if you’re making improvements to a rental, he added, “you feel like you’re throwing money out the door.”

Although the men both work in lucrative industries, they weren’t immune to the lifestyle changes often necessitated by a big purchase.

Several years ago they downsized, forgoing water views and nearly 1,500 square feet in Brooklyn for a one-bedroom in the West Village, which saved them about $2,000 a month on rent.

They also cut back on other spending.

“We didn’t live a monk-like lifestyle,” Mr. Novack said, but they limited dinners out to once or twice a week and dialed back on their shopping.

“You just try to be smarter,” said Mr. Gonzalez, who has a weakness for Barneys and Bergdorf Goodman. “You don’t have to buy everything full price at the top of the trend.”

The rest of their savings for the down payment came from bonus and commission money. Within four years, they had saved more than half a million dollars.

Last year, they came across what Mr. Novack described as a “totally charming” two-bedroom, two-bathroom co-op in NoMad, the area immediately north of Madison Square Park, with a small balcony and open exposures facing east and south.

The apartment was listed for $1.599 million. They negotiated the price down to $1.46 million.

“This is really our most meaningful real purchase together, for sure,” Mr. Novack said.

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An earlier version of this article misspelled the surname of a home buyer who is also a real estate broker at Sotheby’s. As a picture caption correctly noted, he is Alex Novack, not Novak.

Christina Caron is a general assignment reporter. Before coming to The Times, she spent a decade working for broadcast news organizations, and earned a master’s degree from the Missouri School of Journalism. @cdcaron

A version of this article appears in print on , on Page RE1 of the New York edition with the headline: The Holy Grail? A Home. Order Reprints | Today’s Paper | Subscribe


Published at Fri, 22 Mar 2019 13:52:13 +0000