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Homebuyers considering purchasing tiny homes and fixer-uppers to combat high home prices

Housing affordability remains low and some potential buyers are turning to alternative housing options. (iStock)

As housing costs rise, homebuyers are redefining the traditional path to homeownership. About 43% of prospective buyers considered alternative housing options such as fixer-uppers and tiny houses. Remax study reported.

56% of prospective buyers surveyed by Remax said they would consider a fixer-upper rather than focusing on new construction or a traditional starter home. Many buyers are also looking at options like prefab homes and tiny houses, with 39% of homebuyers considering purchasing a prefab home or tiny house.

Some buyers will also need to switch financing to cover the cost of the purchase, with 28% of prospective buyers considering living in an apartment complex and having other tenants cover part of the mortgage. was. According to research by Remax, 28% of buyers also consider purchasing with friends or family, and joint purchases with people other than their significant other are equally popular.

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Newly built homes are popular among millennials despite high housing costs

2023 will be the worst year for housing prices on record

Potential homebuyers may be looking for alternative housing options due to a lack of affordable properties. In 2023, if someone making nearly $79,000 were to buy an average-priced home, more than 41% of her monthly income would be spent on housing costs. Data from Redfin.

“A perfect storm of inflation, high prices, high mortgage rates, and weak housing supply will make 2023 the least affordable year in recent history,” said Elijah de la Campa, senior economist at Redfin. It became,” he said.

To spend 30% of their income on housing, the average homebuyer would need to earn $109,868 per year. That’s $31,226 more than the average household’s annual income, Redfin reports.

Wages are not keeping up with rising housing costs. The average monthly mortgage payment increased by 12.6% to $2,715 in 2023. Wages grew by only 5.2%. Redfin says this is an all-time high, but not enough to offset rising housing costs.

“The good news is that affordability is already improving heading into the new year,” de la Campa said. “Mortgage rates are falling and more people are putting their homes on the market, but there are still plenty of buyers looking to take a bite of fresh inventory. We expect these conditions to continue to improve in 2024. ing.”

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Homeowners who move across state lines in search of affordability find it in certain cities.

Mortgage interest rates are finally starting to fall

Those who buy in 2024 will likely get a lower interest rate than those who bought in the past year. Mortgage rates are expected to fall below 6% by the end of the year. According to Fannie Mae.

“Given expectations for Federal Reserve rate cuts this year and abatement of inflation pressures, we expect mortgage rates to continue to decline as the year progresses,” said Freddie Mac’s chief economist. Sam Carter said. “While lower mortgage rates are welcome news, potential homebuyers are still dealing with the dual challenges of low inventory and continued rising home prices.”

As these interest rates fall, the number of listings may increase as homeowners are more willing to move. Sellers who have been waiting for higher interest rates are likely to get some respite as the lock-in effect that has dominated the market in recent years eases.

To take advantage of lower interest rates, visit Credible to view multiple mortgage lenders and get a personalized rate without affecting your credit.

Homebuyers will struggle in 2023, but homeownership may rise in 2024

Have a finance-related question but don’t know who to ask? Email it to your trusted money expert. Moneyexpert@credible.com Your questions may be answered in Credible’s Money Expert column.

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