The year 2023 was particularly traumatic for first-time homebuyers. High mortgage rates, rising home values, and low inventories have prevented many from achieving their American Dream. Many aspiring homeowners have given up the dream of owning a house. new study shows.
A study by the online arm for a long-running home improvement television show This Old House, published Monday, shows that half of the aspiring homeowners who have let go of their homeownership dream say it’s because they’ll never be able to afford it. The research team of the 1979 TV show that launched the home improvement industry surveyed 3,000 potential homeowners to find out if they think homeownership is possible and what their biggest obstacles are. 85% of aspiring homeowners who were surveyed still want to buy a home this year.
But it’s no wonder that 15% of people who previously wanted to buy a house have completely given up. Goldman SachsReports from October 2023 indicate that Housing affordability is worse than everRedfin reported this. Americans need to earn nearly $115,000To buy a home, you need $40,000 more income than the median American household income.
Indeed, This Old HouseOne in five prospective homeowners will not purchase a home in 2023. The chief complaint about affordability.
“Among these aspiring buyers, a significant portion cited difficulties in affording down payments and concerns about mortgage rates as barriers to purchasing a home,” Taelor Candiloro, a research on This Old House’s reviews team, tells Fortune. “High mortgage rates can certainly influence a buyer’s perception, but there is evident desperation in our survey as 30% would settle for a mortgage rate higher than 6% if it meant finally purchasing a home.”
Top factors that prevent them from purchasing a house in 2023 include home prices, mortgage rate, moving costs and down payment costs. Also, their credit scores and debt levels, as well as their inventory levels, were also considered. Indeed, Mortgage rates peaked in 2008 at 8% in October 2023 and there was a lack of supply for potential buyers, so “2023 was a wash for many who hoped to buy a home,” according to the study.
Willing to concede
Although 20% of aspiring homeowners couldn’t make a purchase based on the factors mentioned above, 72% percent of unsuccessful buyers still have plans to purchase a home in 2024. But many are willing to compromise to achieve homeownership.
Some would-be homeowners are willing to spend more money in order to purchase a home. They will also accept a different location than they had planned. They will also reduce their expectations for the size of the home. Some people are willing to pay more than the original asking price.
BeyondThe study is a good example. Millennials and Gen ZersThey have already been creative in their attempts to avoid buying a house. Housing affordability is so tight that two out of five Gen Zers are unable to afford a home. MillennialsAccording to a report, people work side jobs to save up for downpayments. Redfin StudyReleased in September 2023
Some people “simply don’t have the money for a down payment—a situation that has become increasingly common due to rising mortgage rates and elevated home prices,” Taylor Marr, Redfin’s deputy chief economistSaid in a press release.
Plus, One in five millennialsAccording to a report, many couples are now asking for money on their wedding registry to buy a house. Zillow and The Knot report on October 2023A wedding planning website. With an average of $70,000 needed for a 20% down payment on a starter home, it’s understandable that couples would need extra ways to get cash.
“Most of the first-time homebuyers I am working with are faced with challenges of affordability and competition,” Donna Incorvaja, a real estate agent at RelatedISG Real Estate, Previously told Fortune. “It’s not that they can’t afford to buy, but that what they can afford in today’s market is very different from what a younger generation could buy three to four years ago.”
Sense of optimism
Some homebuyers are still holding on to the dream of owning their home, even though many have given up. Some aspiring homebuyers who want to buy a new house despite having failed to buy one last year believe that prices will fall (despite several Forecasts indicating otherwise) and that inventory levels will improve, which is also a large unknown in today’s housing market.
According to the research, even though there is a certain degree of optimism among prospective homeowners, 76% plan to use programs that will lower their down payment but may not already have a secured mortgage. In fact, only 42 percent of potential homebuyers in 2024 are preapproved, which is the typical first step before starting the home search process.
Others are also holding out for how the 2024 presidential election may impact the economy—and therefore the housing market.
“Real estate tax rates, deductions, and overall policies like increasing housing inventory may be affected as a new president steps in,” Candiloro says. “We found that 13% of aspiring homeowners are currently waiting to see how the 2024 election will impact our economy before making any decisions on purchasing a home.”
Despite affordability challenges, the housing market is constantly changing. This Old HouseHere are some tips to help you achieve homeownership by 2024.
“Doing the necessary research ahead of time on property taxes in the area, putting down more money upfront, or looking for FHA loans can help you avoid more expenses down the road,” Candiloro says. “Securing a mortgage preapproval, shopping for homeowners insurance, and making a moving budget are all things to consider if you’re looking to buy your first home this year.”