With housing prices soaring and wages remaining stagnant, as many as one in six potential homebuyers are abandoning the dream of homeownership.
The challenge of purchasing a home has become increasingly difficult, particularly for young adults in their late twenties to mid-forties.
Home prices are near record highs, and mortgage rates have, in some cases, doubled since before the pandemic, making it harder for individuals to save for down payments and manage monthly costs.
“Incomes have not doubled. The opportunity for people to save for the down payments and then carry that monthly cost is simply not possible in a lot of cases,” said Stephen Kates, a financial analyst with Bankrate.
Kates notes that one in six, or 16%, of consumers who had been house hunting over the past five years, have stopped looking. However, he believes the American dream isn’t dead and suggests that consumers might need to adjust their expectations.
Kates advises potential homeowners to broaden their search areas and not limit themselves to one neighborhood or a specific section of town. He also suggests considering fixer-uppers and rethinking the traditional 20% down payment.
Federal Housing Administration (FHA) loans allow consumers to put down as little as 3.5%, while some conventional loans require just 3%. Eligible veterans and their surviving spouses can take advantage of VA loans, which require no down payment, though fees may be higher than conventional mortgages.
Despite the challenges, experts like Kates believe that with adjusted expectations and exploring different financing options, homeownership can still be within reach.
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