Home Prices Are Finally Starting to Fall
In a good sign for homebuyers, the share of available listings that saw a price cut jumped to 18.9% in July – up 3.4% from the same time last year, and the highest level in two years, according to a new report published by Realtor.com. Price cuts are atypical in July, which is usually a peak time for home sales. But this year is different, because sellers are trying to lure back lukewarm buyers who are facing both high costs and steep interest rates.
A Shift in Homebuying Trends
Despite their combined six-figure income, the homeownership dream has soured for young Americans Laura and Samuel Graves, who are left with little choice but to build their family in a suburban Portland apartment as they patiently search for a home that suits their budget.
"We refuse to become ‘house-poor’ and, like many others, are choosing to sit it out until the housing market is reasonable again," Laura, who works as a financial analyst, told Business Insider in an article published Sunday.
The Financial Reality
Combined with her husband’s salary as an electrician, the couple pull in approximately $250,000 a year. According to the report, they’re hoping to keep their monthly mortgage payment around $3,000, but most homes they’re eyeing exceed that by approximately $2,000 on average. They’ve also claimed to stifle retirement savings and childcare costs to help their situation.
The Impact of High Interest Rates
Home prices dipped in July as sellers tried to lure in would-be buyers, with the median reaching $439,950 from $445,000 the month prior. According to Ralph McLaughlin, Realtor.com senior economist, "First, rates remain higher than expected, which means there is less buyer activity. Second, the prospect of lower mortgage rates coming this fall may have induced some buyers to wait. This combo has led sellers to lower their prices in order to attract more buyers."
The Effects on Homebuyers
Some social media trends indicate millennials have made sacrifices in other ways, even going as far as living in cost-effective vans to save up for their homebuying dream. Cost has become a significant enough factor to make approximately one in five prospective homebuyers consider shopping around in a less safe neighborhood to find a more affordable home, according to Redfin. Other young adults have had to turn to help from parents to help cover the cost of a down payment on a home, or have even opted to live with their parents longer to help ease some of their financial burden and put more money aside for the future.
Conclusion
In conclusion, the housing market is slowly starting to adjust to the new reality of high costs and interest rates. While this may bring some relief to homebuyers, it’s clear that the road to homeownership has become much more challenging. As buyers, it’s essential to prioritize their financial goals and be prepared for the unexpected.
FAQs
Q: Why are home prices dropping?
A: Home prices are dropping due to a combination of factors, including higher interest rates, lower buyer activity, and the prospect of lower mortgage rates coming this fall.
Q: What are some alternatives to traditional homeownership?
A: Some young adults have turned to cost-effective living arrangements, such as living in vans, or opting for alternative living situations to save up for their homebuying dream.
Q: How are high interest rates affecting homebuyers?
A: High interest rates are reducing buyer activity, making it more challenging for homebuyers to find affordable options. Some buyers are opting to wait for lower mortgage rates or consider alternative living arrangements.
Q: What are some strategies for buyers to overcome the challenges in the housing market?
A: Some strategies include prioritizing financial goals, considering alternative living arrangements, and being prepared for the unexpected.
