Challenges of Homebuying : Buying a home is difficult right now. There aren’t enough affordable and available homes, credit restrictions have been put in place, interest rates are rising, and home prices across the country have stopped falling after a brief drop last fall, stalling the housing market.
Minneapolis residents like Nick Gaylord have had to endure more than expected to buy a home. For a year and a half, Gaylord has been house hunting. During that time, he lost four homes.
Gaylord has spent months carefully reviewing listings. However, his time to buy a house is short. Despite making fully underwritten offers that are sometimes 20% higher than the asking price, he never gets the job.
He’s aware of his privilege. Because he works remotely in health care, he has a big down payment and can choose where to live. He still aims for a lower price bracket below the area’s median price to avoid going over his financial limits, especially since his industry is still laying off people.
Even with these benefits, owning a home is hard to achieve. Gaylord compares his situation to playing a video game on “easy” but still finding it too hard.
Homebuying is difficult for many reasons. The housing market has been frustrating this summer due to several factors.
Prices have risen and sales have dropped during a busy time due to a shortage of homes. Since they got their mortgages at historically low rates of 2%, 3%, or 4% during the pandemic, many current homeowners are hesitant to sell and buy in a market where mortgage rates are 6% or higher.
60% of mortgage holders are sticking with sub-4% rates. Even if they can get a good price, they’re less likely to sell their homes right now.
Mortgage rates are now close to 7%, making it harder for people to buy homes. A median-priced home’s principal and interest payment reached $2,258 in June. It reached its peak. The average mortgage payment consumes 36% of the average household’s income, exceeding the recommended 30% limit for housing costs. May was not the most expensive month for housing in 37 years because incomes have increased since 2022’s fall.
The market is also struggling due to tighter credit. Loan programs are harder to get due to a lower Mortgage Credit Availability Index. This is mostly due to industry operational constraints. Low-income and first-time homebuyers are already struggling to find homes due to a housing shortage, so this credit cut hurts them the most.
Despite the Struggle, Hope Some bright spots give homebuyers hope, even though things look bad.
Rental prices have been falling nationwide, which is good news for renters struggling with inflation. In the second half of the year, economists and housing experts expect mortgage rates to fall as inflation slows. By year’s end, rates should drop to 6%.
Despite all the issues, the median home price has been slowly decreasing since March.
Finally, there are fewer buyers in the usually busy housing market. This means less competition and more opportunities for first-time buyers with limited funds.
Overall, buying a home in the current market is difficult. But potential buyers need to keep an eye on the housing market and know how it changes to take advantage of opportunities.