Homebuyers are having to get creative to afford today’s real estate market.
My colleague Charlie Wells just wrote about buyers opting for land-only plots and expansions on a parent’s home so they too can live there.
But these methods aren’t for everyone. A lot of potential buyers are simply locked out of the market. And if that’s you, I’ve collected some tips from financial advisers on how to proceed. Before we dive into that though…
One things to know:
- Mortgage rates at 8% are making a brutal housing market even worse.
… now back to home-buying woes. For those playing the waiting game, Brent Weiss, a financial planner with Facet Wealth, advises buyers to keep the “three Ps” in mind: preparation, planning and patience.
Now is the time to regroup while prices and mortgage rates are high. Here’s what else to consider, depending on where you are in your search:
For first-time buyers:
First, take a second look at your finances and determine what you can afford — keeping in mind a mortgage approval doesn’t equal affordable, Weiss says.
Your monthly home payment should be no more than a third of your income. That way, you can afford to take care of emergencies in your home and life, said Clare Trapasso, executive news editor at Realtor.com.
And while you wait for the right opportunity, be sure to have a financial plan to continue growing your down payment. This will allow you to make a strong offer on a home and negotiate your loan terms.
A sign for “New Homes” stands on display in Harbor City, California. Photographer: Patrick T. Fallon/Bloomberg
For homeowners who want to move (or repeat buyers):
More than half of current homeowners say they’re waiting for mortgage rates to come down before selling.
If this is you, you may consider establishing a line of credit, if you have equity, and taking on renovations to boost your home value for when you’re ready to sell.
It’s a good idea to also find ways to grow your homebuying fund, like renting out a portion of your home for extra cash. While owners can leverage the funds from a sale for their next home purchase, home prices are likely to be more expensive than when you first bought.
For those reconsidering a home purchase now:
Homeownership has long been a popular way to build wealth. But, it’s not the only way. That’s why Facet’s Weiss advises clients to think critically about whether a home purchase is right for them in the first place. (Or return to an apartment if you’re currently a homeowner.)
There’s no shame in renting and focusing on other avenues for building wealth — whether it’s your 401k contributions or your larger investment portfolio. Think of the decision to rent or buy in terms of dating and getting married, Weiss said.
“Like dating, renting gives you complete optionality and flexibility. You can break up and make a change overnight. But if you get married to a house, it’s a long 12-month-plus process that will be emotional and cost you a lot of money.”
What’s Your Take?
This week we’d like to hear from people trying to buy a home in New York City or the surrounding area. What’s your price point? How is the hunt going? We’re gathering perspectives for an upcoming article. Send us an email at bbgwealth@bloomberg.com if you’d like to share your story.
Compass | Wealth Builder Team
We’re not just your average real estate team. We’re a group of dedicated professionals who collaborate to provide our clients with more than just assistance in buying and selling properties. We’re passionate about helping our clients build wealth through real estate investment.
Dare David ., Broker Associate — M: 408.888.2024 — Team@DavidWBT.com
