Having trouble keeping up with your housing costs? You’re not alone. Homebuyers face record prices that are twice what they were two years ago in some places. Homeowners must deal with skyrocketing insurance and property tax rates. Rent prices have seen increases of nearly 5% per month in some markets.

“It’s a tough situation for nearly all Americans,” Debt.com chairman and CPA Howard Dvorkin says. “When you get into a situation where you spend more than half of your income just to cover your rent or mortgage payments, it’s just not sustainable. It’s critical to find solutions to lower those costs because otherwise, they can quite seriously bankrupt you.”

With that in mind, Debt.com created this guide. Whether you’re a renter, owner, or buyer, we can help you understand the housing market and find smart ways to lower your costs. And if you need professional help, call us at to connect with the programs and services you need.

Table of Contents:

Housing costs

Housing costs comprise the largest portion of a consumer’s budget. A whopping 33%! That’s more than the next two leading expenses (transportation 16% and food 13%) combined. So, for every $100 of income you earn, you’re spending around $33 on housing expenses.

It’s normal for housing expenses to take up the core percentage of our budgets. But with house prices and rent steadily increasing, that percentage keeps growing larger. Most households simply can’t afford to spend half their paycheck on home costs.

Housing prices

Buying a home is a significant financial commitment. Potential homebuyers need to consider price, location, the safety of the area, and a whole host of other factors before deciding. Mortgage loan terms often last 30 years and house prices are the highest they’ve been in history. So, a mistake can be costly.

Between 1999 and 2019, the median home value rose from $111,100 to $231,000. In the two years that followed, the median house price rose to $343,300. It took just two years for values to double compared to the ten years prior.

When the pandemic struck in early 2020, it also shifted the landscape of the housing market to be more advantageous to sellers. Now, homes that are valued at $200,000 are selling for $50,000 to $100,000 above that market price. That’s a problem for homebuyers that rely on financing to buy a home. Mortgage lenders don’t extend loans for over-market value.

Rental prices

Renting is often seen as a cost-effective alternative to buying a home, with less stress and shorter commitments. That is until the COVID-19 pandemic changed the world.

Since then, the U.S. rental market has seen a dramatic increase in the demand for apartment and house rentals. Access to affordable housing has become increasingly difficult if not impossible in some areas. Inflation has not just affected food and gas. Rent prices are rising faster than wages across the country, putting people in a tough position to not only pay their rent but their other obligations as well.

Rent costs can be attributed to 3 factors:

  1. Construction of housing is too expensive
  2. The Great Recession had a huge impact on the rental market
  3. Programs that might have solved the problem have been neglected by politicians.

Understanding the housing market

What is the housing market?

The housing market is one part of the larger real estate market in the United States. Commercial, residential, and industrial property purchases and sales make up the real estate market. So, the residential housing market is one big piece of the real estate pie in the U.S.

The housing market in the United States is an indicator of the economic strength of the country. If there’s trouble in the housing market, then there may be bigger economic troubles on the horizon.

Supply and demand have had a huge impact on the real estate market as a whole. Currently, we are in a seller’s market because there is a high demand for housing and a low inventory of houses available. Several factors have attributed to this. COVID-19 is the easiest to blame, but this demand started before the pandemic. Investors and second-home landlords have been buying up properties for investment opportunities, including new opportunities like vacation rentals through services like Air BnB and Verbo.

What factors affect demand?

Demographic factors are the main driver behind the demand in the housing market. These factors include the size of the market—the higher the population the higher the demand. In addition, rates of marriages, divorces, and deaths, all affect the demand for housing. Many experts believe that the U.S. will see an increase between 7.4% to 16% in home values by the end of 2022, with a supply and demand mismatch still being in favor of sellers.[2]

The Federal Reserve recently raised interest rates by a quarter-point, in an effort to cool off the demand in the housing market. They say they will continue to raise rates throughout this year and at least into 2023. The idea is that higher rates will discourage some buyers, which decreases demand. But there is a question of whether this traditional economic strategy will work in this unique market, given that cash buyers are currently the biggest drivers of demand.

Is now the time to rent or buy?

The answer is owning. Owning a median-priced house is more affordable than the average rent of a 3-bedroom home in over 50% of the country [4]. This affordability in buying a home is due to historically low mortgage rates. Interest rates have been low enough to offset recent price hikes, keeping ownership on the positive side compared to renting.

The trouble for potential buyers, especially first-timers, is how difficult it’s becoming to save for a down payment. Inflation is shrinking buyers’ budgets and if you’re trying to save up while making rent payments you can be stuck in a vicious cycle.

There are programs available to help first-time homebuyers. FHAloans.com will walk you through the process and requirements for closing costs and down payment assistance.

There are also programs that require little to no down payments, such as VA and USDA loans. However, you must meet certain requirements to be eligible. You must serve the armed forces for the former and live in a rural area for the latter. However, if you’re considering moving out of the city because you work remotely now, it might be worth exploring.

Young and Old Homeowners

Home architectural model paper box cubes on black background
Each generation is attracted to a different area to live. See where the youngest and oldest homeowners in the country reside.
Read more

Most Likely to Default

Most Likely to Default
Debt, lack of income, and unemployment have led these cities to be where homeowners are most likely to struggle to pay their mortgage.
Read more

Big Cities, Cheap Homes

Big Cities, Cheap Homes
In big cities like Chicago and Dallas, housing costs may be lower than you’d think. These big cities have the most affordable homes.
Read more

Cities with Staying Power

Cities with Staying Power
Homeowners stay in their homes for about seven years on average. Here are he cities where homeownership lasts the longest.
Read more

Where Millennials Buy

Where Millennials Buy
Millennials (age 26-41) are jumping into the housing market. Here’s where they want to live.
Read more

Millennials Homeownership

Millennials Homeownership
Millennials are in a predicament. Most cannot afford homes and those that can are deeper in mortgage debt than other generations.
Read more

Help for homebuyers

If you’re in the market to buy a home nowadays, you’re in for a fight. The market is low on inventory, creating a supply and demand issue that has allowed sellers to increase the price of their homes exponentially. But you can still be a successful homebuyer if you know what you’re doing and get the right support.

The most important thing is to have your finances in order. Make sure to speak with a HUD-certified counselor and a mortgage loan officer before you start shopping for homes. They can help you understand what you can afford before you start your search.

If you work with a housing counselor, they can also help you create an action plan for saving up for the down payment and closing costs. They can even help you see how down payment and closing cost programs available in your area will reduce this cost burden. In other words, even if you’re not a Veteran or moving out to the country, you could still get your mortgage with much less money down.

Getting a highly talented real estate agent is also paramount. Multiple offers are being submitted on almost any given property, and your agent will be your negotiator to get your offer accepted.

Lastly, make sure as you get into this that you have patience. It is possible that your offer may not be selected the first time. Or even the second time. Buying a home is a very emotionally taxing experience. Make sure you have the mental fortitude for the ride.

In the meantime, Debt.com offers a range of guides that can help you become mortgage-ready and learn more about navigating the homebuying process.

How to Buy a Home

Whether you’ve bought a home before or not, the challenge can be incredibly intimidating. It’s tempting to go with the first place that falls in your price range or give up on the process and continue renting. Let’s examine how to make our life easier while looking for your new home.

Here’s the Real Cost of Homeownership

The real cost of owning a property involves many hidden costs beyond just the mortgage payments. More than half of homeowners are caught off guard by these. And while most Americans consider homeownership a cornerstone of wealth and financial security, being financially prepared is a battle.

Preparing Your Finances for Homeownership

Getting ready to buy a home should begin long before scrolling through online listing sites. One of the most important aspects is understanding your finances to make sure you’re in a financially healthy position to make such large of a purchase. Knowing more about this process will make it much less stressful and potentially cheaper.

First-Time Homebuyer Programs for Millennials

For Millennials, the far-reaching dream of homeownership is closer than ever. Sky-rocketing house prices and large down payments can be defeating. Fortunately, there are programs available that help Millennial homebuyers overcome these challenges.

Why Mortgage Pre-Approval is Essential!

There are some subtleties that you need to understand when it comes to getting pre-approved for a mortgage. Knowing the difference between a mortgage pre-approval and pre-qualification is the first thing. Learn how a pre-approval letter could make or break your chances of buying a home.

An Honest Guide to Earnest Money

When it comes to making an offer on a home an earnest money deposit or “escrow deposit”, shows the seller that you are serious about purchasing the property. It is a commitment, to show that they should pick your offer over other potential prospects. Learn everything you need to know from real estate expert Bill Gassett.

Making an Offer on A Home

Buying a home is a multi-step process. The most important and nerve-wracking part is making your offer. This isn’t simply throwing out a number you think the seller will accept. In today’s market, you need the right strategy to beat out other offers. Learn to navigate the battlefield called, real estate.

Getting the Right Mortgage

If you’re like most Americans, you’ll need a mortgage to buy a home. And finding the right mortgage can be a challenge of its own. You must consider your financial situation and your available options. From direct lenders to conventional banks, consumers today have a wide range of options to choose from. By understanding your needs, you can make an informed decision.

How to Buy a House with Bad Credit

While having good credit will make the home buying process easier, it’s not impossible if you don’t. There are loans specifically designed to help buyers with bad credit achieve homeownership. Especially if you’re a first-time homebuyer, you can qualify for an FHA loan with a FICO score as low as 500! And some loans have no minimum credit score requirements at all!

8 Home Buying Mistakes to Avoid

Beginning your search for a new home is an exciting time, and you’re probably eager to jump into the market and find your dream home. But BE CAREFUL. Homebuyers are frequently making mistakes that are costing them thousands or even their prospective new homes! Learn how to avoid them and make sure you avoid missing out on your perfect home.

Should I Get a Home Inspection? 6 Reasons Why Homebuyers Need Inspections

You might think agreeing to waive the home inspection is a good way to get your offer accepted, but it could be a costly mistake. When you find a house that checks all the boxes, the last thing you want to do is think about everything that can go wrong. But the best time to think about that is before you sign a contract. Learn six reasons why getting a home inspection is a good idea.

Help for homeowners

Traditionally as a homeowner, you enjoy fairly stable housing costs. But today, rising insurance rates and property taxes are squeezing homeowners, and inflation is just adding to the problem. If you’re renovating, you may be seeing higher costs than you anticipated in your remodeling budget. But all hope is not lost.

Since the beginning of 2020, the government has introduced several programs to help people get back on their feet. Many states have launched Homeowner Assistance Fund (HAF) programs to help homeowners who are struggling. You can use a HAF to catch up on past-due payments, make current payments and even get help with utilities and insurance in some states.

Another big question facing homeowners is whether to take advantage of low-interest rates now for refinancing or tapping home equity. The Federal Reserve has indicated that they will raise rates several times before the end of 2022, so now could be the best time to refinance or get a home equity lending product. But it’s important to understand the costs involved and the potential pitfalls you can face.

Being a homeowner in 2022 isn’t an easy task, but with the right information, you can protect your home and your investment. And Debt.com has guides that can help!

Smart Tips for Reducing Costs as a Homeowner

Owning a house is a lot of work. You want to make sure your investment is well taken care of. You can make simple renovations that can increase your home’s value by thousands of dollars. The three most obvious things to upgrade before selling your home are the lawn, appliances, and furniture.  Use these simple strategies to maximize your return.

Saving Money on Homeowner’s Insurance

84% of people don’t fully understand their homeowners’ insurance and end up paying more than what they need to as a result. This could be because a quarter of people haven’t even read their policy! Our rundown on homeowners’ insurance will show you ways to save. For example, shopping around for your insurance is one of the easiest ways to cut costs.

Is It the Right Time to Refinance?

Refinancing your mortgage to get a more favorable interest rate can help you protect your most important asset: your home. People refinance their homes for different reasons, but it’s crucial to understand how your mortgage and refinancing work. One quick tip is that if you can reduce your interest rate by one percent, it’s worth doing so.

Your Guide to Tapping into Home Equity

In 2021, homeowners’ equity increased by a total of nearly $2.9 trillion from the previous year[3]. Home equity is commonly used for renovations to raise the value of a home.  In addition to making a profit when you decide to sell, you can use that equity to further your financial goals. Knowing what equity is and how to protect it are essential to protecting your financial future.

Using Forbearance When You Can’t Afford Mortgage Payments

Forbearance is when you and your mortgage company agree to temporarily suspend or reduce your payments for a set amount of time. This allows you to get back on your feet without damaging your credit or risking foreclosure if you are dealing with short-term financial problems. Once it has ended, you are required to repay the amount that was decreased or postponed.

How Many Times Can I Miss a Mortgage Payment?

The CARES Act suspended foreclosures because of the COVID-19 pandemic, which ended in July 2021. Now, the consensus is that it takes 4 missed payments for the foreclosure process to begin, though it could vary depending on your lender, though consider penalties begin between 10 to 20 days after your first missed payment.

A Realist’s Guide to Avoiding Foreclosure
As inflation rises across the country, financial hardships are continuing to plague Americans. If you’re struggling to make your mortgage payment on time, don’t lose hope! You may be able to work something out with your mortgage lender before the foreclosure process begins. Learn how to properly do that and more so you can prevent foreclosure and save your home.

Should You Pay Off Your Mortgage Early?

Paying off your mortgage early can make a considerable difference to your financial well-being. You can save thousands of dollars on interest costs, but make sure you consider the consequences before committing to pay extra. For instance, you need to think about how losing your mortgage payment will impact your annual tax returns. We help you understand the ins and outs before you commit to a payoff.

How to Sell Your House

The real estate market has become more advantageous to sellers in the last few years. Inventory of homes has been at a record low since the end of 2020 and demand is at a record high. Selling a house has never been easier, as long as you know how it works. This guide will walk you through the selling process to answer any questions that may be troubling you.

The Hidden Costs of Selling a Home

Experts estimate that selling your home will cost you 10% of the final sales price. But where does all that money go? While most of the charges are unavoidable, there are some optional ones that a savvy seller may have some room to save.

Understanding the Value of a Pre-Listing Appraisal

You might think that a home appraisal is just for a homebuyer, but as a seller, you can benefit from getting your home appraised before you list it. Learn how a pre-listing appraisal can help you price your home right and even choose the right listing agent.

Help for renters

With the average asking price for an unfurnished apartment around $1,588, it’s no surprise renters pay around $485 billion in rent each year[4]. As rental prices continue to soar, 16% of low-income renters can’t afford to pay their rent in full each month.

All but nine of the 100 biggest cities in the U.S. have seen price increases in the past year. In cities like Las Vegas, prices are going up by almost 5% per month!

So, whether you’re a diehard renter for life or just a renter struggling to make the leap to homeownership, this market is challenging. There is hope though. With the right rental strategy, you can minimize your housing costs as much as possible. Debt.com is here to help!

Getting Emergency Rental Assistance

Congress has approved $46.5 billion in emergency rental assistance to help renters catch up on back-rent, keep payments current, and help with utilities. Though many of these programs have ended, there may still be places where the government can help you with your housing. But be careful, as there are rental assistance scams that people need to watch out for.

Should You Get Renters Insurance?

Most people blame common myths for the reason they don’t get renters insurance. From high cost to a lack of significant coverage, 56% of renters don’t see the necessity because it’s not their property. But it’s a lot cheaper and covers a lot more than you’d think. Here are 8 myths about renters’ insurance that we’ve debunked for you.

How to Break a Lease the Right Way

Breaking a lease can cost you a lot of money. And with evictions back now that CARES Act protections ended, those struggling to stay up to date on their rent payments may have to move to find something cheaper. If you still have time left on your lease, we’ve found ways that can help to get you out of your financial obligation and save money as well.

Renters Want to Buy a Home for the Wrong Reasons

The American dream is to have a partner, kids, and a nice house. But more recently, renters have been wanting to buy a home for the sole reason to customize it to their liking and not abide by the landlord’s rules. While personal choice is certainly a viable option, they can’t afford the right home. Being financially intuitive and understanding exactly where you stand with your money, will save you (and your potential real estate agent) a lot of headaches.

Sources

Article last modified on June 23, 2022. Published by Debt.com, LLC