Affordability challenges keep many buyers on sidelines

When it comes to buying a home, one of the most important factors that potential buyers consider is affordability. However, in recent years, affordability has become a major challenge for many buyers, keeping them on the sidelines and out of the housing market. This is a concerning trend, as homeownership is an integral part of the American dream and can provide numerous financial benefits. In this article, we will explore the various affordability challenges that are keeping many buyers on the sidelines, and how they can potentially overcome these obstacles to achieve their dream of homeownership.

Rising Home Prices

One of the main reasons for the affordability challenges in the housing market is the continuous rise in home prices. According to the National Association of Realtors, the median existing-home price in the United States has increased by 17.9% in the past year, reaching an all-time high of $363,300. This rapid increase in home prices has made it difficult for many potential buyers, especially first-time homeowners, to enter the market. As a result, many potential buyers are forced to continue renting or stay in their current living arrangements, unable to afford the rising costs of homeownership.

Solution:

In order to overcome the challenge of rising home prices, potential buyers can consider looking for homes in more affordable areas. While it may require a longer commute or a smaller home, opting for a less expensive location can save buyers a significant amount of money on their mortgage. Additionally, buyers can also consider purchasing fixer-upper properties and renovating them, which can be a more cost-effective option compared to buying a move-in ready home.

Low Inventory

Another challenge affecting affordability in the housing market is the low inventory of available homes for sale. The supply of homes for sale is currently at an all-time low, with a 3.8-month supply in June 2021, according to the National Association of Realtors. This means that there are not enough homes for the number of buyers looking to purchase, resulting in bidding wars and increased home prices. This lack of inventory is particularly challenging for first-time homeowners with limited budgets, as they are often priced out of the market by more financially stable buyers.

Solution:

In order to overcome the low inventory challenge, buyers can consider expanding their search to include off-market or unlisted properties. These properties may not be advertised publicly and can often be found through word-of-mouth or by working with a real estate agent. Additionally, buyers can also consider widening their search area to include nearby neighborhoods or towns with more affordable housing options.

Tightened Mortgage Requirements

In response to the 2008 financial crisis, lenders have tightened their mortgage requirements, making it more difficult for potential buyers to obtain financing. This is especially challenging for buyers with less-than-perfect credit or who are self-employed. Additionally, the high demand in the housing market has also led to an increase in cash offers, making it difficult for buyers who require a mortgage to compete.

Solution:

Borrowers can improve their chances of obtaining a mortgage by taking the time to improve their credit score and paying off outstanding debts. Additionally, working with a reputable lender and getting pre-approved for a mortgage can also give buyers an advantage when making an offer on a home. For those who are self-employed, providing detailed and organized financial records can help lenders better assess the borrower’s financial situation and potentially improve their chances of getting approved for a mortgage.

Conclusion

The challenges of affordability in the housing market can make it seem impossible for many buyers to achieve their dream of homeownership. However, by being proactive and considering alternative solutions, potential buyers can overcome these obstacles and enter the market. Whether it is through expanding their search area, improving their financial standing, or being creative with their home purchase, there are ways for buyers to overcome affordability challenges and make their dream of homeownership a reality.