For many young Americans, the dream of proudly owning a home feels less like a middle-class milestone and more like a prize offered only to those with family money or extraordinary incomes.
The monthly mortgage payment on a median-priced home has increased 15% over the past 12 months, while incomes have increased only 4%. And even if mortgage rates fall over the next year, an increase in buyer activity while the iron is hot would heat up competition and drive prices up enough to make it harder to afford to buy.
“As soon as these interest rates drop, all hell is going to break loose and prices are going to skyrocket,” said Barbara Corcoran, a famous real estate mogul and television personality.
According to Corcoran, investors will rush to the sidelines if interest rates fall significantly, sparking a frenzy that could push prices to record highs.
Corcoran’s dangerous omen has left some young adults nihilistic about their housing futures. Many truly feel like they will find themselves renting endlessly and not using a viable method to purchase their first home.
In a TikTok clip of Corcoran’s comments, one person responded: “I should have bought a house at 7.” » Another said: “I am adjusting my horizons as follows: I will rent until 40 years old. » In accordance with a current Redfin
Here are four trade-offs to consider when buying before home prices become even further out of reach:
Rethink your location
If you are excluded from your current neighborhood, don’t despair. There may also be cheap properties in many areas offering comparable or even better facilities. A growing share of home buyers are moving to very inexpensive locations. They left Los Angeles for Las Vegas, San Francisco for Sacramento and New York for Northport, Florida.
Remote employees, in particular, benefit from a bonus. The freedom to work from anywhere opens up the possibility of living in areas with a lower value of life while still maintaining your current job. By getting closer to your family or friends, you could enrich yourself in an intangible way by sharing your assets. An extended housekeeping can help with childcare and a good friend can give you an airport experience.
Start with financing
If you don’t need to reside elsewhere, you can still buy without moving. You can rent in your desired location while purchasing an investment property in a cheap space. This way, you can start building equity that can be used toward a more expensive home sooner or later.
Take, for example, Philip Garcia, who, while residing in California, purchased an investment property in his hometown of El Paso, Texas, which has among the least expensive real estate markets in the country. By renting the El Paso property, he generated rental income and gained equity, which he was able to use to purchase other properties, including his current residence in Seattle.
“I spent my 20s living in very expensive neighborhoods (Bay Space, Los Angeles), where I couldn’t buy,” Garcia said. “But I always wanted to create wealth by becoming a property owner. So I looked at the savings I had accumulated at the age of 31 and found a market where I could afford to buy a house to rent and I did. The math all seemed good, so I did it a few times. Now the results are better than expected, I have three profitable assets that have appreciated well since I purchased them.
Reevaluate the house model
If you’re not proud of owning your best home with a yard, storage space, and spacious interior, consider a more modest home. Single-family homes are sometimes worth 20% more than townhouses and 29% more than condominiums.
There are advantages to choosing a townhouse or rental. Living in a dense, walkable area with public transportation, parks and restaurants could offer a healthier, more environmentally friendly lifestyle than a sprawling suburb. And while townhouses and condos sometimes don’t have personal yards or garages, they usually include shared amenities.
Staff in place
Another method to gain access to property is to find an accomplice to become a co-owner. You and your buying partner can live together as roommates, manage the property as a pure investment, or explore arrangements in which one partner pays a lease to the other for sole occupancy.
Still, if you’re looking for a home with someone you’re not married to, it’s essential to secure a legally binding contract that sets clear terms for sharing ownership and a plan for dissolving the partnership if necessary.
In conclusion: stay versatile
Although the path to homeownership may seem difficult, it is not an unattainable dream. Future homeowners can meet the challenges and secure their home by adopting these methods and remaining vigilant in a rapidly changing market. The key is to remain versatile, resourceful and knowledgeable so that you can easily navigate the twists and turns of the real estate market.