Owning a home was once the ultimate litmus test for achieving the American Dream. A status symbol and an asset for one’s financial portfolio, homeownership was a sort of life measurement, a milestone you were expected to reach by a certain age on par with marriage, kids, and a sizable 401K investment. But, the reality is that buying a home post-pandemic has become a nightmare. Rising inflation rates, high closing costs, low inventory, and the return of student loan repayments on top of mounting personal debt mean that millennials and Gen Z’ers face a metaphorical minefield in their pursuit of stable housing. According to research from the National Association of Realtors (NAR), the average income a person needs to afford a starter home rose to $107,000 in 2023. And, while a Bankrate survey showed that nearly two-thirds of millennials want to buy a home, the market is currently experiencing a housing shortage that’s fueling the kind of bidding wars younger generations just can’t afford to win.
In other words, it’s not the avocado toast, it’s an economic moment that is crushing wannabe buyers and it isn’t getting better anytime soon. Still, the want persists. And while we’re not here to question that (who isn’t longing for a more stable housing payment with these crazy rent prices?), we do want to pose a few questions worth considering before you head into this most unfriendly of markets.
Why Do I Want To Buy A House?
This is a fairly obvious starting point, but considering the motivations behind your home-buying choice can be a good indicator of whether or not you’re ready to enter the market. If societal expectations are the only thing fueling your desire to sign on the dotted line, weathering the purchasing process might be tough. Are you looking to own simply because it’s the next rung on the traditional ladder to success? Did your parents own a home at your age and you’re subconsciously measuring your life achievements by their timetable? Does homeownership signify the kind of wealth and status you’re hoping to achieve? Chances are, if you’re only inspired by external motivators, the act of buying is going to end up feeling hollow. According to a 2019 survey, 63% of millennials who purchased their first home regretted the decision. And that was before the market chaos of the last 4 years.
It’s natural to experience some level of buyer’s remorse when making such a big financial decision, but you might be able to minimize those feelings by making an emotional investment in the homeownership process. Maybe you want more space for your growing family. Maybe you’re hoping for a lifestyle change, opting to get out of the city and enjoy the suburban slowdown. Maybe the equity attached to homeownership is a key tenant of how you hope to create generational wealth. Personally, I’d love to be able to customize my home – making changes to the flooring, the wall color, and the layout that represent my aesthetic, not my landlord’s. Buying a home can be a rewarding act of independence, a way of funding your future self’s dreams and life goals. Make sure you’re doing it for reasons that make sense to you.
Is Now Really The Right Time?
Unfortunately, we can’t predict the future, but taking stock of where you are and where you might be in the next 6 months to a year will help you calculate if buying now is the right move. Do you feel stable in your job or is your industry’s market in flux? Could you see yourself wanting to move closer to home, or closer to friends out-of-state? Would you want to travel more or would you be okay with spending more of your paycheck on staying put? Measuring how a home will fit in with those not-far-off goals can help you decide if you should buy in the present or push things off to a future date. If it’s the latter, remember, you’re not saying “never,” you’re just saying “not right now.”
Can I Afford This?
Unless you have the rare privilege of not having to worry about money – where it’s coming from and if you’ll have enough – the financial “what ifs” of homebuying should be top of mind. Deciding whether you can afford a house goes beyond the basics of how large of a loan you’re approved for. Can you make those monthly payments on your current income even if your credit history is guaranteeing you more? Have you factored in interest rates, the different types of homeowner’s insurance you’ll likely need, the HOA fees (and rules) if you live in a gated community (or one of the increasing areas open to those unique micro government-like ruling orgs), and the property taxes?
Then, there are the “hidden fees” of buying. Closing costs, i.e. everything you pay for beyond the downpayment (and don’t forget how much the down payment influences your monthly), can often cause first-time buyers to panic once the sale is made. You’re supposed to budget for them from the beginning, but it can be hard to keep track of appraisal fees, attorney fees, and escrow funds during the buying process. Sometimes you can negotiate those costs — another fact new homebuyers aren’t always aware of — but you’ll still likely be paying thousands of additional dollars when all is said and done. And once you’ve moved in, there are more financial drains waiting. Without the on-call maintenance help most renters enjoy, you’ll be tasked with minor and major fixes – either paying for them or attempting them yourself. When those eventual repairs are added to monthly utilities, landscaping costs, appliance upgrades, and needed renovations – especially if you buy a fixer-upper – the total price you’re paying for your home can increase fairly quickly. Make sure you’re keeping track of your bottom line so you’re not scrambling to afford that dream home or adding more crushing debt.
Have I Done All My Research?
Say you’re up to speed on the financials of homebuying, does that mean your days of sourcing information are over? Sadly no. The market is constantly shifting and staying informed on everything from rising mortgage rates to the effects of gentrification and which school districts outpace the others are all topics you need to become well-versed in. According to an Open Door survey, 35% of first-time homebuyers wish they did more research before purchasing their property while 32% listed the toughest challenge of homebuying as a lack of real estate market knowledge.
The fact is, you’ll likely spend dozens of hours touring a shocking amount of homes before you land on “the one,” but any prep you can do before getting boots to the ground will give you peace of mind and make the process less of a time expense. Some key things you can research ahead of time include historical data on the neighborhood/city you’re looking at moving to, home buying trends for that market, property prices in the area (are they rising, falling, or staying stagnant), and comps (or homes similar to the one you’re interested in).
What Are My Must-Haves And Deal-Breakers?
Not every element of homebuying needs to be stressful so when you’re writing down your wish list, think big. An open-concept layout, a backyard pool, a double-island kitchen, heated tile floors – think of everything you could possibly want in your forever home. Give yourself permission to enjoy the act of pursuing this American Dream. Then, once you’ve indulged in some of those affluent fantasies, start ticking off what really matters to you (and what you can actually afford) – lots of natural light, central heating/air, a wraparound porch – and what you can live without. Sure, a steam shower or a double-range oven would be nice, but could you see yourself living your best life in a home you own that doesn’t have those things?
Conversely, making a wish list will help you to identify your personal deal-breakers when it comes to house hunting. Would living on a busy street or too close to a main highway be a turn-off? Is two stories just too much space? Are carpeted floors a nonstarter? You may not be able to afford every luxury, but if you and the market aren’t simpatico in this moment with regard to your must-haves, maybe the time isn’t right. Is it better to wait than to settle? The key home buying question for these times.
