American Nightmare: How much does it cost to buy a house?


The US residential real estate market is so hot that the heat is keeping young buyers away from the housing sector.

Today, with young homebuyers historically charged with being the nation’s first buyers, the paradigm has shifted as Millennials and Gen Z are out and about watching new home purchases.

Nearly half (48%) of Gen Z (those born between 1997 and 2012) and 44% of Millennials (born between 1981 and 1996) say they are less likely to buy a home given the condition of the housing market over the past two years. This is compared to 30% of baby boomers and 38% of the general population, according to a new study by Money and Morning Consult,

New home prices have soared 20% or more, depending on the city and state, over the past two years. While the reasons for buying a home vary, pandemic-weary Americans have reassessed their lifestyle priorities and home life (which may no longer include commuting) and are ready to pay to get the home and the community they want to live in for the long term.

This commitment to home and hearth comes with a steep price tag. Consider these industry statistics.

  • A January study by Real Estate Witch showed that 82% of millennial homeowners in the United States express regret about a recent home purchase. In this demographic, 26% said their property was too expensive and 30% said home maintenance costs were too high.
  • Median prices in the United States have risen from around $323,000 at the start of 202 to $429,000 in the first quarter of 2022. Even taking into account an 11.5% rise in the inflation rate over the same two years, the average home price in the US still remains $68,000 over the same period, according to the US Federal Reserve Bank of St. Louis.
  • With home prices rising 20.6% from March 2021 to March 2022, according to the S&P CoreLogic Case-Shiller National Home Price Index, rising home prices are effectively locking out millions of buyers.

“It’s that first-time homebuyer who’s really affected by soaring interest rates,” Century 21 CEO Mike Miedler said in a recent Yahoo Finance Live interview. “If you look back to a year ago, you need about $30,000 to $33,000 of extra income to buy the house at today’s interest rate at the median price. “

The housing market has growing problems

The real housing problem – affordability – isn’t going away anytime soon, experts say.

“Housing affordability continues to be a major challenge,” said Yatin Karnik, former head of mortgages at Wells Fargo and founder of Confer, Inc., a company that helps residential home buyers find mortgages. affordable. “We’ve seen sustained price appreciation and now adding salt to the wounds with rising mortgage rates, is a double whammy for borrowers; especially first-time borrowers, who make up a third of the buying market. .

With rising interest rates imperative to keep inflation in check in the coming buying season, affordability will be even more strained for borrowers. “This affordability factor will most likely weigh heavily on the housing market,” Karnik told TheStreet. “(But) I expect to see further price reduction as investor demand slows.”

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Other experts see a slowdown in the market by the fall.

“I don’t see complete relief, but I think by the end of the summer, August through early September, we’ll see price drops,” said Ralph DiBugnara, Founder and President of Home Qualified, based in New York. “We are already starting to see price drops in some areas. Homes currently on the market that are overpriced are being discounted, so I think we’ll see a 10-15% price drop by October or November.

According to DiBugnara, most of the price cuts will be for overpriced homes, but overall prices will be reduced based on their specific market.

“With this, new homes that come on the market will be valued at their true value,” he told TheStreet. “So there’s definitely some relief coming in that direction for buyers.”

Moreover, according to Redfin, competition in bids decreased last month for the first time in a year. This is the sign of a slight cooling.

Strong housing demand still in play

Currently, real estate professionals are still seeing strong demand.

“Buyers continue to buy even with higher prices due to rising incomes and investment values,” said Nicole Rueth, senior vice president of the Rueth team at Fairway Mortgage, Denver, Collar.

Rueth says she understands affordability is becoming a concern for an entire generation of shoppers.

“Even so, I tell my customers to come in as soon as they can, waiting only costs them more,” she told TheStreet. “Additionally, refinancing opportunities are ahead of us, giving them the ability to lower their monthly payment.”

With house prices soaring, with no definitive relief in sight, you can’t blame young buyers for noticing the death of the American dream – home ownership.

“You may not see a complete death of the American dream, but you may see that it could be more of a delayed realization. It may not be achievable until much later in life,” Ruth said. Shin, Founder and CEO of PropertyNest, a real estate listing and home services site.”It can also be very difficult for people whose parents don’t own their own home or any equity to realize that dream, because often parents help their adult children with major purchases such as buying a house.”

“Younger generations may also have to rethink what kind of home they can build or buy that might work for them,” Shin said.

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