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Debt.com » Homeownership May Be The “American Dream” But Homebuying is a Nightmare

Homeownership May Be The “American Dream” But Homebuying is a Nightmare


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It’s more expensive than ever to buy a home.

That’s the main takeaway from a “Housing Market Update” by Redfin. The real estate services company has been analyzing the housing market for nearly two decades, but it’s not the only one.

Over three weeks, four organizations released studies that show housing affordability is near crisis level:

  • Low inventory is driving up home prices.[1]
  • The average monthly mortgage payments are at an all-time high.[2]
  • Landlords are jacking up rents to offset rising costs.[3]
  • Interest rates are at 23-year high.[4]

Let’s break this down further…

Low supply means high price

Prices are up 4% from last year – and that’s largely due to not having enough supply for the demand. In fact, Redfin agrees that housing inventory had “one of its biggest declines” in over a year.

The median home price is $376,250. Forbes reports that current homeowners are “unwilling to sell.”[5] Most are scared to “give up” the equity they’ve earned and their lower interest rates.

Another contributing factor to low inventory starts back in 2020: Rocket Mortgage reports that in the years since, a lack of skilled construction workers and specialty supplies are still contributing to a building bottleneck.

Have monthly mortgage payments ever been this high?

Redfin says no. From mid-August to mid-September, monthly mortgage payments reached the highest they’ve ever been: $2,632.

It’s so expensive that more than half of current homebuyers have compromised on their dream home.

America’s third-largest construction group polled over 500 first-time homebuyers this year. Within that group, more than 3 in 10 bought a smaller house, and 1 in 4 moved to a different neighborhood than they originally planned.

A week later, a different poll asked how homebuyers felt about it. One-third are “less confident in their ability to afford a home today compared to five years ago.”

It may be because it’s actually cheaper to rent right now. One of the largest rental listing sites called Rent.com pulls together reports just like Redfin. In its “Rent Report”[6] – which was conducted the same time as Redfin’s “Housing Market Update” – says renting is $600 cheaper per month.

You may almost pity your landlord

Here’s proof renting may be cheaper than owning: Landlords are only making 7 cents for every dollar their renters pay. It’s no wonder rent goes up every year.

More than 90% of rental payments go towards a property’s mortgage, maintenance, insurance, and taxes, according to nonprofit National Apartment Association. Out of all of those operational costs, the most expensive is – you guessed it – the mortgage payment.

“Just like every sector of the economy and countless American households, the rental housing industry has grappled with escalating costs in the face of record inflation,” said Bob Pinnegar, NAA President.

High prices are not only affecting homebuyers, they’re a major concern for renters and landlords alike.

Realtor thought leaders beg to lower interest rates

Two days ago, two major real estate associations wrote a letter to Fed Chairman Jerome Powell pleading to not raise interest rates further this year.

The realtors and mortgage bankers say the mortgage rates have not been above 7% in the past two decades.

They warn the Fed it’s killing the market – people can’t afford to buy a home.

Can anyone solve the “crisis?”

On November 6, a government-led nonprofit called the National Institute of Building Sciences will host a hearing to debate solutions for the “housing crisis.”

It’s open to the public in-person or virtually. Register here.

“Housing affordability is a serious issue for many American families,” said Stephen T. Ayers, Interim CEO of NIBS. “Whether it’s offsite construction or other innovative construction means and methods, we must find solutions to alleviate this crisis.”

Government works slowly – people need help now.

If debt is holding you back from your dream home, call (855) 572-8232 today. Debt.com can provide the guidance you need to reach your financial goals.

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