Prior to the red-hot housing market, there was a simple profile that constituted a buyer.
Four years ago, a buyer who had 3% down and was pre-qualified for a loan could buy a home.
In addition, the top buyers are willing to waive appraisals and inspections and, in some cases, don't even view the house they're purchasing in person, he said.
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Middle-class affordable housing is absolutely suffering because everyone is being squeezed.
Americans know how hard it is to buy a home. More than 70% of Americans think the housing market is in a bubble, and more than half think it's a bad time to buy a home, according to a survey.
Some 38% of potential buyers said they have delayed or canceled plans to buy a home due to inflation. The survey found that people of color were more likely to delay a home purchase due to rising costs.
Jon Cohen, chief research officer at Momentive, said that more scuttled or delayed plans to buy among these groups threatens to exacerbate already wide gaps in homeownership rates along racial and ethnic lines.
The median sales price in February was $357,300, a 15% increase from a year earlier.
Danielle Hale, chief economist at Realtor.com, said that buyers that need loans will pay more for them as mortgage rates are increasing.
Hale said that that can hurt younger consumers. It also means that it is no longer possible to build wealth through homeownership.
Peter Murray is the principal broker at Murray & Co. Real Estate in Frederick, Maryland.
If you have had months of searching and being outbid, some homeowners may be tempted to stretch their budgets to purchase a house.
Marguerita Cheng is a certified financial planner and CEO of Blue Ocean Global Wealth in Maryland.
She said that there are situations when she has told people it's okay to stretch, but that they need to understand the impact that will have on other areas of their life.
If you anticipate lifestyle changes that will free up room in your monthly budget, it makes sense to pay slightly more. Going from two cars to one, or having children who will enter public school, means you are no longer paying as much for child care.
She said that if you have calculated your budget using your base salary, not including any bonuses, you may be able to afford more. There may be more wiggle room if you don't have consumer debt and have a solid emergency fund.
The amount of time you plan to spend in the home is related to that. If you want to live in a house for more than five years, it makes sense to pay more now.
There are some situations where increasing your homebuying budget doesn't make sense.
If paying more would make it difficult to contribute to other financial goals, Cheng says to stick with your original plan.
She said that if the only way that stretch is going to happen is if they borrow from retirement money, it doesn't make sense.
If the only way that stretch is going to happen is if they borrow from retirement money, I would probably say that doesn’t make sense
She warned against wiping out cash savings to pay for a more expensive home. Variable costs include taxes, insurance and repairs.
Cheng said it doesn't make sense to stretch your budget to a point where you can only afford tax breaks. You will be in trouble if those benefits go away.
There are a few options for buyers who can't stretch their budgets.
Murray said they either pause their home search or need to adjust their search criteria.
Some who need more time to save might want to leave the buying market. If prices continue to rise, you could be further priced out of the market.
Re rethinking your must-haves might make sense. Looking at different neighborhoods, including ones that aren't as popular or farther away from city centers. They might need to be flexible on the size of the home they buy.
Hale said that they should have all of their paperwork ready to go so that when they see a house they like, they can make an offer.
If you want to be competitive in this market, you have to throw more money at the problem or be prepared.
Cheng said that working with a financial planner or advisor can help people understand what they can really afford.
Cheng said the loan officer is going to be helpful in helping you structure your loan.
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