A recent survey suggests that Americans aren’t giving up on homeownership; they’re just waiting for prices to come down. (iStock)
A recent survey found that while many Americans still dream of buying a home, the majority are waiting until mortgage rates fall before making a purchase.
According to BMO Financial, 67% of respondents said owning a home is one of their most coveted goals, but 71% said they are waiting for interest rates to fall before entering the housing market. investigationAmong Americans who still plan to buy a home in the current market, 30% said they plan to withdraw funds from their 401(k) retirement plan to cover the cost.
Americans will likely have to endure another summer before they get a relief package. Since July, the Fed has kept the federal funds rate in a range of 5.25% to 5.5%. Fed officials expect to cut rates in 2024 but have said they need more confidence that inflation is moving toward their 2% target rate.
“Given the continued strength of the U.S. economy and persistent underlying inflation, markets are postponing their Fed rate cut expectations until the fall,” said Michael Gregory, deputy chief economist at BMO. “Looking out to 2025, we expect the Fed to maintain its gradual rate-cutting pattern.”
Homebuyers can find the best mortgage rate by weighing their options. They can visit online marketplaces like Credible to compare rates, choose loan terms and get pre-approved with multiple lenders at once.
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Homeowners insurance premiums increase delays
High mortgage rates aren’t the only thing delaying the dream of homeownership: 43% of respondents say rising home insurance costs could affect their ability to own or afford a home. Gen Z (60%) are most affected by these costs, followed by millennials (55%).
Homeowner’s insurance rates have risen 55% over the past four years as losses pile up and insurers struggle to recoup costs, according to a recent Guaranteed Rate Insurance report. reportPremiums for 2023 alone increased by 19%.
The rise in home insurance premiums comes as Americans looking to buy a home are struggling with rising mortgage rates and home prices. The average interest rate on a 30-year fixed-rate mortgage has remained steady at around 7% for the past month, according to Freddie Mac.
“It’s clear that Americans are feeling the pressure of rising interest rates, and many are anxious about how to navigate an ever-changing housing market,” said Thomas Parish, head of U.S. retail lending at BMO. “It’s critical that customers engage a mortgage advisor, especially during times of rising interest rates. Advisors can guide potential buyers and sellers through the homebuying process, help determine appropriate budgets and dispel common misconceptions about the path to homeownership, even if it may seem out of reach right now.”
If you have a mortgage, you’re usually required to have homeowners insurance, but you don’t have to be tied to a particular insurance company. If you want to save money on your home insurance, shop around for the best rates. Credible helps you compare home insurance rates from major insurance companies in one place.
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Homebuyers are spending more than they can afford
According to a recent NewHomesMates.com survey, rising mortgage interest rates and home prices have led 20% of Americans to spend about 30% of their monthly paycheck on mortgage payments, and 10% pay more than half their paycheck. investigationThe survey found that those willing to take the plunge and take out a mortgage had to allocate a larger portion of their salary to their mortgage payments and make significant cuts to their everyday spending.
Based on the average annual salary and a 10% down payment, most first-time buyers could afford a home for about $207,529, which is 38% less than the current median-priced home. Increasing the down payment to 20% would lower the minimum annual salary to $98,202, but it could take years to save up that amount, Clever’s report said.
According to a recent Realtor.com report, some buyers are finding creative ways to get a foothold in a tough market. reportOne option to consider in order to pay off your mortgage and other payments is house hacking, where buyers purchase a home with the intent of renting out rooms on a long or short-term basis.
The co-buying trend is another way for young buyers to share the costs of homeownership, according to the report. Co-buying helps friends and family pool their funds to come up with a down payment and closing costs. It’s also a way to split higher monthly mortgage payments, utilities, and maintenance and repair costs.
If you are considering buying a home, it is a good idea to compare different lenders to find the best mortgage interest rate. Visit Credible to compare different lender options and choose the one with the best interest rate.
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