I have to counsel them to be patient — the right house will come along.”

Ryan Fonseca

I tell a lot of my young buyers, this first house may not be your dream home, your forever home. Instead, think of this as a long-term investment.”

Tracey Mulvey

Today’s first-time homebuyers face a perfect storm of forces not seen by their parents or their parents’ parents.

Inventory is historically low — at any given time, there are excruciatingly few houses on the market.

Prices are historically high — the average starter house in this region has risen from $300,000 to $500,000.

And interest rates are higher than they’ve been in decades — more than 8% for the traditional, 30-year fixed rate.

Swirling together, low inventory, high prices and high interest rates are creating a torrent of challenges for young buyers hoping to find their perfect home. For some, it can feel like an impossible task.

Realtor Ryan Fonseca of Century 21 Topsail is working with a young couple who got married earlier this year and have been looking for a home in the East Bay for more than a year. One works in Bristol County, the other on Aquidneck Island. They’ve chased after good homes in this region, and they’ve made offers on several properties, but they’ve always been outbid.

Fonseca said their frustration has led them to look elsewhere. They talk about giving up on the East Bay and purchasing in Warwick or Cranston. “I try to talk them out of it,” he said, warning that the commute through Providence traffic twice a day will impact their quality of life. Yet he understands why they’re getting restless, even desperate.

This couple, and others like them, can purchase a home on the other side of the state in the mid-$400,000 range that is newer, fresher, updated and larger than what they can purchase in the East Bay for the same price. Take a $450,000 home in Warwick, lift it up and move it to a comparable lot in this region, and it might sell for $550,000 or $600,000.

Facing these challenges, the Realtor becomes part-counselor.

“I have to counsel them to be patient — the right house will come along,” Fonseca said. “As cliché as this sounds, what’s meant to be, will be. Things happen for a reason.”

Changing expectations

Realtor Tracey Mulvey of RE/MAX River’s Edge loves working with first-time buyers, though this market has made it difficult. Similar to Fonseca, she spends time counseling them, and one of her clear messages is to adjust expectations.

“I tell a lot of my young buyers, this first house may not be your dream home, your forever home. Instead, think of this as a long-term investment. Even if it’s a small, two-bedroom, fixer-upper, if you hold it and wait for the [interest] rates to come down, maybe you can keep it as an investment property,” Mulvey said. “I spend a lot of time changing expectations these days.”

So that is one option for a first-time buyer: instead of landing your perfect family home right out the gate, consider a smaller place that will suit your needs for a few years, that perhaps will become an asset that grows in value. The gamble is that you can accumulate wealth in the starter home, and when interest rates inevitably fall again, be able to afford a second home while holding onto and renting out the starter home.

“It’s a great strategy,” Mulvey said. “I don’t see the prices coming down around here anytime soon. So anyone who has an investment property in their back pocket, that just becomes an asset for the rest of their lives … The way the properties around here hold their value, chances are they’re going to make money whenever the time comes to sell it.”

The message is to be creative — think about becoming a landlord someday.

Staying patient

Regardless of their strategy, first-time buyers have no choice but to wait patiently if they’re looking for a home in the East Bay. “I have clients who are still actively looking, but they’re not optimistic,” Mulvey said. “Or they’re sitting on the sidelines and waiting because there’s just no inventory … When you’re looking at a 1,300-square-foot home for $500,000, it’s just not affordable for most buyers, not with these interest rates.”

Regardless, Mulvey said most clients she works with are not giving up on the East Bay. “They love this area, so they’re just waiting and being super patient.”

They’re also trying to be flexible with their current living arrangements, signing short-term leases or renewing their one-year leases and putting the house search on hold for several months.

Adjustable-rate loans

Both Mulvey and Fonseca said first-time homebuyers should seriously consider adjustable-rate mortgages. Buyers are often wary of the risk involved with a loan that adjusts higher after five or seven years, but the average buyer does not stay in their first home that long – especially if they’ve adjusted their expectations lower and invested in a more modest starter home. Chances are they will be moving before that interest rate ever adjusts.

“They should be talking about different loan options. A 30-year fixed is not the only loan out there,” Fonseca said.

One thing first-time homebuyers should know is that they’re not alone. Talking about the young couple who has been looking for an East Bay home for more than a year, Fonseca said, “We’ve put in offers, but we haven’t been the winning bid. I tell them, ‘it’s not just you, this is happening to a lot of buyers.’ ”