Invest in you: Ready. Set. Grow. House hunting? Here's when to increase your budget and when to stick to your original price
The housing market is hot right now — if you’re a seller.
Buyers, on the flip side, are having a harder time finding homes.
People are aware of the struggles they face in buying a home. More than 70% of adults believe the housing market is currently in a bubble, and more than half say it’s a bad time to buy a home, according to a survey of more than 7,000 adults from Momentive.
Price is a major factor that’s keeping potential buyers on the sidelines — some 38% said they have delayed or canceled plans to buy a home due to inflation. People of color were also more likely to push off a home purchase due to rising costs, the survey found.
“More scuttled or delayed plans to buy among these groups threatens to exacerbate already wide gaps in homeownership rates along racial and ethnic lines,” said Jon Cohen, chief research officer at Momentive.
In April, the median sales price for homes were $391,200, a nearly 15% increase from a year earlier, according to data from the National Association of Realtors.
At the same time, mortgage rates are also increasing, which means buyers with loans will pay more for them, as well, said Danielle Hale, chief economist at Realtor.com.
That can hurt younger consumers, as well as first-time buyers, according to Hale. It also means that homeownership as a path to building wealth is now out of reach for many.
“It’s a very competitive market for those who are shopping at the top of their budgets,” said Peter Murray, a realtor and the principal broker at Murray & Co. Real Estate in Frederick, Maryland. “There’s a lot of disappointments.”
Everyone is getting squeezed
Prior to the pandemic’s red-hot housing market, there was a simple profile that constituted an “A” buyer, according to Brian Copeland, a realtor.
“Four years ago, an ‘A’ buyer was someone who was pre-qualified for a loan, had 3% down and could go out this weekend and buy a home,” said Copeland, who is also president of the industry association Greater Nashville Realtors. “Now, an ‘A’ buyer has all cash.”
In addition, the top buyers today are willing to waive appraisals and inspections and, in some cases, don’t even view the house they’re purchasing in person, he said.
“Everyone is being squeezed,” said Copeland, adding that middle-class affordable housing is “absolutely suffering.”
The money math
Some homeowners may be tempted to stretch their budgets to purchase a house, especially if they’ve had months of searching and being outbid.
It can make sense in some cases to stretch your budget, according to Marguerita Cheng, a certified financial planner and CEO of Blue Ocean Global Wealth.
“There are situations when I have told people it’s okay to stretch, but just understand the impact that’s going to have on other areas of your life,” she said. Read More...
