Home prices are falling, but the housing market is still too expensive for most Americans.
High home prices, income and closing costs are holding back nearly three in four aspiring homeowners, Greg McBride, chief financial analyst at Bankrate, said Wednesday.
“Affordability is a central issue for owners and non-owners alike,” he added, “with 64% of Americans willing to sacrifice, such as downsizing or moving out of state, to find more affordable housing.”
Bankrate worked with YouGov to conduct the survey. Over 2,500 adults in the U.S. were surveyed in March; 1,338 of that sample were homeowners.
The median price of a home in the U.S. was about $400,000 —about 5.6 times the real median household income.Mortgage rates are volatile. After rates rose in the latest week, demand for mortgages fell 8.8%. Higher rates equate to higher costs on a monthly basis.
There may be hope on the horizon: Home prices fell 3% in March, the largest year-over-year drop since 2012, according to real-estate brokerage Redfin RDFN said on Wednesday. That follows February’s 1.2% dip. The drop in March was the largest in a decade, which is as far as the company’s records go on home prices.
Millennials are struggling to buy homes
Millennials, aged 27 to 42, make up the biggest group citing affordability as one of the key issues that’s preventing them from buying a home.
Older millennials, between 34 and 42, were the biggest group that cited the inability to afford the down payment or closing costs as a major reason why they don’t own a home.
Generation Z, aged 18 to 26, said they simply did not have enough income, or weren’t ready yet to own a home.
Gen X and baby boomers, collectively aged 43 to 77, said a lack of income prevented them from homeownership, as well as high home prices.
Nearly two-thirds of Americans surveyed said they’d be willing to take action to find less expensive housing, which includes downsizing their living space, moving out of state, buying a fixer-upper, or moving farther away from friends and family.
Younger generations — millennials and Gen Z — were more willing to take action to do that, the Bankrate survey noted, as compared to Gen X-ers and boomers.
But 45% of recent homeowners regret buying
And among those who recently purchased a home, 45% have regrets doing so.
Reasons for regretting jumping into one of the biggest purchases of their life include maintenance and other “hidden costs” making homeownership more expensive than expected, or having bought too small of a house, or choosing a bad location, and so on.
The costs of homeownership go beyond the mortgage payments: From taxes to homeowners’ association fees, as well as repairs, they can add up. For instance, the average annual cost of maintaining a single-family home is around $6,400, according to a report by services-marketplace Thumbtack.
Many homeowners are actually feeling stuck with low interest rates, according to some reports, which is dis-incentivizing them from selling their home and giving up their ultra-low mortgage rate they secured during the pandemic years for a much higher one.
Younger generations again felt that sting of regret a little more than older Americans: 69% of Gen Z and 56% of millennial homeowners surveyed said they had one or more regrets about purchasing their current home, Bankrate said, versus just 44% of Gen X and 36% of baby boomers.
Certainly! It seems like you're interested in the housing market, affordability issues, homeownership challenges, and the impact of various factors on different generations' abilities to purchase homes. Here's a breakdown based on the concepts in the article:
1. Home Prices and Affordability
- Home prices are falling, yet they remain high for most Americans.
- Affordability is a significant concern, with high home prices, incomes, and closing costs preventing many from buying homes.
- According to Greg McBride from Bankrate, nearly three in four aspiring homeowners face challenges due to affordability issues.
2. Survey Insights on Affordability
- Bankrate, in collaboration with YouGov, conducted a survey with over 2,500 U.S. adults in March, revealing key insights:
- 64% of Americans are willing to make sacrifices (e.g., downsizing, moving out of state) to find more affordable housing.
- Millennials and Gen Z cite affordability as a major hurdle, with older millennials particularly affected by down payment and closing costs.
3. Mortgage Rates and Demand
- Mortgage rates are volatile, affecting monthly costs; a recent rise led to an 8.8% decrease in mortgage demand.
- However, there might be hope, as home prices saw a 3% drop in March, the most significant year-over-year decline since 2012, according to Redfin.
4. Generational Challenges in Homeownership
- Millennials (27 to 42 years old) face affordability challenges, especially concerning down payments and closing costs.
- Generation Z (18 to 26 years old) lacks sufficient income or feels unprepared for homeownership.
- Gen X and baby boomers (43 to 77 years old) also struggle due to income limitations and high home prices.
5. Regrets Among Recent Homebuyers
- Around 45% of recent homeowners express regrets about their purchase, citing reasons such as unexpected maintenance costs, small house size, or undesirable location.
- Costs of homeownership extend beyond mortgage payments, including taxes, association fees, and repairs, which can accumulate to an average annual cost of $6,400 for maintaining a single-family home.
6. Impact of Low Interest Rates
- Some reports suggest that low interest rates are discouraging homeowners from selling their homes, fearing higher mortgage rates if they relocate.
7. Generational Differences in Homeownership Regrets
- Younger generations (Gen Z and millennials) express more regrets about their home purchases compared to Gen X and baby boomers, possibly due to various factors like unexpected costs or inadequate planning.
Understanding these concepts provides insight into the complexities of the housing market, the challenges faced by different generations, and the multifaceted nature of affordability and homeownership issues.
