A recent survey found that 92% of millennials who had planned to buy a house this year said that inflation had impacted their goal. This is likely not surprising to many, as inflation can have a significant impact on one's ability to save for a major purchase like a home.
Despite the challenges posed by the pandemic, most people are not letting it stand in their way, according to a survey from Real Estate Witch. The education platform, which is owned by real estate data firm Clever, found that people are still finding ways to pursue their goals.
Of the millennials who are delaying their buying plans, 59% say they're responding by saving more money for the purchase, 36% say they're spending more than expected, 26% say they're buying a fixer-upper, and 25% say they're buying a smaller home.
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Millennials are in their prime homebuying years, with the typical first-time buyer being 36 in 2022. This is up from 33 in 2021, according to the National Association of Realtors.
In 2021, first-time buyers made up 26% of home purchases, compared with 34% in 2020. The combination of year-over-year double-digit price increases and rising mortgage rates created an affordability problem for many buyers.
The situation is gradually improving as home prices continue to slide. According to the Realtors association, the median price for an existing house was $366,900 in December, just 2.3% higher than a year earlier and down from $370,700 in November. Last June, the median price was $416,000, 13.4% higher than it is now.
Interest rates on mortgages have eased in recent months, making home ownership more affordable for many buyers. The average 30-year fixed-rate mortgage is now 6.21%, down from 7.32% in late October, according to Mortgage News Daily. This means that monthly payments are more manageable for many buyers.
Although it's difficult to say where mortgage rates will be in the coming months, experts agree that it's unlikely that rates will drop to the levels seen in 2020 and 2021. Therefore, if you're thinking of buying a home, it's best not to wait for rates to fall further.
The Federal Reserve's emergency actions to prop up the economy in the wake of the Covid pandemic hitting the U.S. in 2020 led to low rates.
"Those were unusual circumstances," said Lawrence Yun, chief economist for the National Association of Realtors. "The market is now returning to more normal conditions."
"Buyers should be prepared for interest rates to be around 5% or 6%," Yun said.
One potential obstacle for buyers is a lack of choices.
As of last month, there was a 2.9-month supply of homes on the market. This means that at the current sales pace, it would take 2.9 months to sell all of the listed homes if no new homes were added to the market. This is down from 3.3 months in November, but up from 1.7 months in December 2021. A balanced market is one that has a supply of four to five months, according to Redfin.
According to Yun, there is relatively little inventory available in the marketplace.
According to him, even with the housing slowdown, days on the market are still less than a month. This implies that people who are in the market to buy are quickly finding a listing they want and snapping it up.
If you're looking for a seller who is more likely to negotiate on price, one strategy is to look for homes that have been on the market for a longer period of time. This is because sellers who have been on the market for a longer period of time may be more motivated to sell and may be more open to negotiating on price.
According to him, there is usually a lot of competition for new listings. If you find a home that has been on the market for at least a month or two, it is a great opportunity. He said that sometimes sellers will take 10% to 15% off the list price.
Sellers are now less likely to go under contract with a contingency, such as making the final sale contingent upon a home inspection. This dynamic has changed significantly in recent years.
According to Stephen Rinaldi, founder and president of Rinaldi Group, a mortgage broker based near Philadelphia, waiving the appraisal and waiving of inspections are closely linked to low interest rates.
According to Rinaldi, sellers are generally allowing contingencies again, with the exception of in premium areas.
According to Yun, it may be worth expanding your search radius if you're looking at homes close to a city.
He said that there are always more affordable houses further out and that those homes tend to stay on the market for a longer period.
An adjustable-rate mortgage may be a good option if you're trying to lower your costs, according to Yun.
An ARM has a lower initial rate compared to a traditional fixed-rate mortgage. This rate is fixed for a set amount of time, after which it will adjust depending on where interest rates are.
According to Yun, most people don't own their first home for very long - usually just 5-10 years. Because of this, he suggests that an adjustable-rate mortgage (ARM) may be a better option than a fixed-rate mortgage. With an ARM, you get a lower interest rate initially, and by the time the rate adjusts, you'll be ready to sell the house.
It's important to make sure you could afford the maximum interest rate on your loan, even if it only changes a little bit. Experts recommend doing this to avoid any financial difficulties down the road.
According to Rinaldi, you may be able to find an ARM with an introductory rate that is at least one percentage point below fixed rates.
He said that it is worth evaluating depending on the person's situation.
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