The housing market caught fire in 2020 as Americans decided en masse that they wanted homes and were willing to pay for them.
Two years on, the pandemic-era housing boom continues to rage. Home prices have set one record after another. Bidding wars have become the norm in many markets.
While the sustained spike in prices is good news for sellers of homes, it’s not so great for buyers forced to pay prices that would have been unthinkable a year or two ago, and even to bypass basic safeguards such as appraisal waivers and inspection clauses.
“It’s a weird market,” says Donna Deaton, a Realtor at RE/MAX Victory + Affiliates in Westchester, Ohio. “I want it to go away.”
Alas, the continued shortage of homes for sale means this intense seller’s market isn’t going away for a while. Affordability remains a challenge.
Soaring prices aren’t the only factor squeezing buyers. There’s also the dramatic run-up in mortgage rates, which have jumped more than two full percentage points since the summer of 2021. That means buyers can’t afford as much house as they once could. The National Association of Home Builders estimates that less than half of homes sold in the U.S. are within the budget of a family making the U.S. median income of $90,000.
Affordability woes continue to mount as rising interest rates and home building material costs that are up 20 percent year-over-year are causing housing costs to rise much faster than wages.”
— Robert DietzChief Economist, National Association of Home Builders
The squeeze is especially acute for first-time buyers, who haven’t built up the equity that allows them to trade up to another home. In a Bankrate survey conducted earlier this year, nearly two-thirds of non-homeowners (64 percent) say an affordability factor is holding them back from owning a home. This includes 43 percent who say their income levels are not high enough, 39 percent who think home prices are too high and 36 percent who can’t afford a down payment and/or closing costs (respondents could select more than one factor).
Additionally, 58 percent of all U.S. adults would be willing to take action to find more affordable housing, such as moving out of state (27 percent), buying a fixer-upper (21 percent), moving farther from family and friends (20 percent), moving farther from work (13 percent), moving to a less desirable area (11 percent), and/or some other action (3 percent). Seventy-five percent of Gen Z (ages 18-25) and 69 percent of millennials (ages 26-41) would take at least one action to find more affordable housing compared …….