June is Homeownership Month, and many people have asked me, "Will I ever be able to own a home?" I get why. Owning a home has long been a cornerstone of the American Dream, but as higher interest rates and higher-priced homes show no signs of stopping, is it still attainable in today's market? Many buyers are apprehensive about the costs associated with homeownership and wonder if it's truly worth the investment.
Luckily, The Geiger Stern Team is here to clarify things. We’ll explore some of the same strategies I use to help my clients buy a home even in today's market, as well as highlight the lasting benefits of owning a home for you and your family.
You can still afford to buy using these strategies...
When prices and interest rates are high, buying a home might seem daunting, but there are several strategies to make it more affordable:
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Consider a Smaller Home or Different Location: Look for homes in less expensive neighborhoods or consider smaller properties that fit your budget better.
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Increase Your Down Payment: Saving more for a larger down payment can reduce the amount you need to borrow, lowering your monthly mortgage payments. Ask a family member to give you money for your down payment.
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Explore Different Mortgage Options: Adjustable-rate mortgages (ARMs) can offer lower initial rates compared to fixed-rate mortgages. Just be aware that rates can increase over time.
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Improve Your Credit Score: A higher credit score can help you secure a better interest rate. Pay off debts and avoid taking on new ones to boost your score before applying for a mortgage.
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Utilize First-Time Homebuyer Programs: Look into federal, state, and local programs that offer grants, loans, or tax incentives for first-time homebuyers, including down payment assistance programs.
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Negotiate with Sellers: In some cases, sellers might be willing to cover closing costs or lower the price. It never hurts to ask!
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Lock in Rates Early: If interest rates are rising, consider locking in your mortgage rate early in the buying process to avoid paying higher rates later.
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Budget Carefully: Ensure your budget includes all homeownership costs, such as maintenance, taxes, and insurance. This will help you understand what you can truly afford.
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Get Pre-Approved for a Mortgage: This not only gives you a clear idea of your budget but also makes you a more attractive buyer to sellers.
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Consider Buying a Fixer-Upper: Homes that need some work are often priced lower. With some renovations, you can create your dream home while building equity. Check out this article for our advice on buying a fixer-upper in Westchester County.
Why is buying a home so expensive anyway? Here are some factors:
Many people in today’s market are discussing the trials of home affordability. But what are the key components that have affected today’s buyer pool? Here are the three main contributors:
Mortgage Rates
A key factor influencing home affordability is the current mortgage rates. While this topic has been contentious for some time, it remains a vital element that impacts a buyer’s mortgage payments. Lower mortgage rates can significantly ease the financial burden of purchasing a home, as they lead to reduced monthly payments. This makes homeownership more attainable and financially manageable for many individuals and families.
Home Prices
Another crucial factor is home prices, which are closely tied to the availability of housing inventory. When there are fewer homes on the market and a high demand from buyers, prices tend to increase. After experiencing a relatively stable rise in 2023, home prices are expected to continue climbing moderately throughout the year. Even though the housing inventory is anticipated to grow slightly, there still won't be enough homes to meet the demand from prospective buyers.
Wages & The Job Market
The final critical element for real estate affordability is the job market. Affording a home becomes challenging when wages and employment opportunities are limited. Higher wages enable potential homebuyers to qualify for larger mortgages and afford more expensive homes. Conversely, economic downturns or stagnant wage growth can restrict affordability, especially in areas with high living costs, making it harder for individuals and families to buy homes that suit their needs.
The Benefits of Homeownership
Despite fluctuations in home affordability, owning a home remains a cornerstone of the "American Dream." The appeal goes beyond simply having a place to call your own; there are numerous advantages to homeownership:
An Investment Opportunity
Owning a home is often viewed as a smart investment, offering protection against inflation compared to other investment types. Unlike assets that tend to depreciate—like cars or certain financial instruments—real estate generally appreciates in value over time. Additionally, real estate can provide tax benefits and potential rental income, enhancing its appeal as a long-term investment.
Increase Your Net Worth
Homeownership is a powerful tool for building personal net worth. As homeowners pay down their mortgage and property values rise, their home equity increases, boosting their overall net worth. This equity can be leveraged for various financial goals, such as funding education, starting a business, or saving for retirement.
Build Generational Wealth
Another significant benefit of homeownership is the ability to build generational wealth. By owning a home and accumulating equity over time, homeowners can pass valuable assets down to future generations. This legacy provides financial stability and security for your family, ensuring they are taken care of long after you're gone. To build generational wealth through homeownership, it’s essential to maintain the property, make strategic improvements that increase its value, and develop a financial plan to preserve and grow the asset's value over time.
If affordability leaves you with questions, it’s important to remember the underlying reasons for wanting to become a homeowner. Whether your goal is to have a space to call your own, establish a stable home base for your family, or invest in real estate, the benefits of owning a home are plentiful. If you have questions about the current market and are unsure how much home you can afford, reach out to The Geiger Stern Team. We're here to help you navigate the home-buying process and guide you toward achieving the American Dream.
