Housing market fact or fiction
The housing market, influenced by the lingering impact of COVID since 2020, continues to experience ripple effects. U.S. home prices have reached near-record highs, and mortgage rates have surged to levels last seen in 2000. While long-term homeowners are in a favorable position, with substantial home value gains and low mortgage rates, potential homebuyers face challenging conditions due to limited choices and affordability concerns.
Bankrate conducted a survey to gauge American sentiment regarding the housing market, and the outlook is mixed. Nearly half of Americans believe it's a bad time to purchase a home, and about a third feel they may never afford their dream home.
Americans' Views on the Housing Market:
Now Is a Bad Time to Buy a Home:
- 49% of U.S. adults agree.
- The West and Midwest regions (51% each) are more inclined to agree than the Northeast (44%).
- Baby Boomers (54%) and Gen X (52%) are more likely to agree compared to Millennials (44%) and Gen Z (41%).
Verdict: Fiction While the current environment may not seem ideal for homebuyers due to high prices and rising mortgage rates, it is unclear whether conditions will improve in the foreseeable future. A shortage of housing supply, driven by homeowners holding onto low-interest mortgages, lack of construction, and high demand, is likely to keep prices from falling significantly.
I'll Never Afford My Dream Home:
- 32% of U.S. adults agree.
- Women (34%) are more likely to agree than men (29%).
- Boomers (26%) are less likely to agree than younger generations.
- Those earning less than $50,000 annually are more likely to agree (40%) than higher income brackets.
Verdict: It Depends The ability to afford a dream home varies depending on individual circumstances and what constitutes a 'dream home.' Recent housing trends show that people are choosing to renovate and stay in their current homes, often using equity for renovations. Others are relocating to more affordable areas.
Mortgage Rates Will Stay Elevated:
- 49% of Americans agree.
- The Midwest (54%) and South (51%) show higher agreement rates than the West (47%) and Northeast (44%).
- Gen Z (33%) and Millennials (40%) are more likely to agree compared to Gen X (53%) and Baby Boomers (62%).
Verdict: Fact Housing experts agree that mortgage rates will remain higher than the sub-3% rates seen in late 2020 and early 2021. A strong economic recovery and unexpected rate hikes have led to the current rate levels, and it is expected they will stay elevated for some time.
A Buyer Needs a 20% Down Payment:
- 32% of Americans agree that 20% is the minimum.
- The West and Northeast (34% each) are slightly more inclined to agree than the Midwest (30%) and South (31%).
- Gen Z (24%) is less likely to agree than older generations.
Verdict: Fiction While a 20% down payment is ideal, it is not a strict requirement. FHA loans require as little as 3.5% down, VA loans are available with no down payment for qualified military personnel, and even conventional loans can be obtained with 3% down. Numerous down payment assistance programs are also available for first-time homebuyers.
Renting Is Cheaper Than Owning:
- Only 17% of U.S. adults agree.
- Gen Z (24%) and Millennials (21%) are more likely to agree than Gen X (14%) and Boomers (13%).
Verdict: Fact (with Some Caveats) Rent prices have surged during the pandemic, leading many to reconsider renting. Owning a home with a fixed-rate mortgage can provide long-term stability and build wealth. However, homeowners are responsible for additional costs such as property taxes, insurance, and maintenance, which are not present in renting.
A Buyer Needs Excellent Credit to Get a Mortgage:
- 39% of U.S. adults agree.
- The West (41%) and South (40%) regions show higher agreement rates than the Midwest (35%) and Northeast (36%).
- Boomers (44%) are more likely to agree than younger generations.
Verdict: Fiction While higher credit scores lead to better mortgage rates and loan options, borrowers with a wide range of credit scores can secure a mortgage. FHA loans, for instance, are available for those with scores as low as 500 or 580 with a down payment, and down payment assistance programs exist for first-time homebuyers.
In summary, the housing market is a complex landscape with varied perspectives. While some sentiments are factual, others depend on individual circumstances and local market conditions.