On Friday, the National Association of Realtors reported that 2023 saw the smallest number of home sales in nearly 30 years. Last year was rough for homebuyers and realtors as a trifecta of forces made it harder than ever to buy a place to live. Or, at least the hardest in nearly three decades.
Using historical as well as current data on income from the U.S. Census Bureau, we found that while 68 out of 100 Americans could afford to buy a home in 1960, only 43 out of 100 Americans can afford to do so now.
We still have the sky-high prices from the pandemic and pre-pandemic years, but now we also have sky-high mortgage interest rates. So the two worst things you could possibly look at if you were an average person looking to buy a house.
Millennials have been hit hard financially, with more debt and a lower net worth than their parents had at the same life stage. Growing that wealth has been made more difficult due to the drop in housing supply over the last 15 years, which has pushed prices up and made it that much harder to get into the market.
According to a Zillow study, homeownership was overall more easily accessible in the 1970s compared to today. Homebuyers of the '70s, on average, were buying homes costing 1.7 times their annual income, whereas today's homes tend to cost first-time buyers more than 2.5 times their salary.
After he took office in August 1979, Fed chair Paul Volcker fought to control inflation through aggressive interest rate hikes, leading the average 30-year fixed mortgage rate to surge to a peak of roughly 18% by late 1981. The spike in borrowing costs caused home affordability and sales to plummet in the early '80s.
However, if you're looking for a bargain, you're likely to find the lowest prices in the winter. There are fewer buyers over the winter months, so many sellers take their homes off the market for the season with the plan to start fresh in the spring.
There is no age limit to a mortgage application. If you have a substantial down payment and a steady income (which can include pension and Social Security payments), you have a good chance of approval regardless of your age.
Student loan debt: Countless studies have shown both millennials and Gen Z have delayed life moves such as buying a home due to student loan debt.
In fact, some Gen Z real estate trends are pointing in an optimistic direction. According to a recent study from a major real estate brokerage about 30% of 25-year-olds owned their own homes in 2022, 2-3% ahead of both millennials and Gen X at the same age.
According to C.A.R.'s monthly Consumer Housing Sentiment Index, in April 2023, 59% of consumers said it was a good time to sell, up from 55% the previous. Only about 25% feel it is a good time to buy a home, unchanged from last year.
The volume of existing home sales was down more than 6 percent from December 2022 to December 2023, according to the National Association of Realtors. And, according to the Fannie Mae Home Purchase Sentiment Index released in January 2024, an overwhelming 83 percent of consumers believe it's a bad time to buy a house.
Buying a home may not make sense in 2023 since mortgage rates are so high. Property values are also up in many parts of the country, so high home prices may price out many buyers. There's a chance the country could fall into a recession.
The price of everything, from a sack of flour to a winter coat, keeps climbing every year. Since 1970, the Consumer Price Index saw a 500%-plus increase. Even after adjusting for inflation, today's dollar buys a whole lot less than it did 50 or even 25 years ago. For example, a gallon of gas in 1994 cost just $1.06.
Age doesn't matter. Counterintuitive as it may sound, your loan application for a mortgage to be repaid over 30 years looks the same to lenders whether you are 90 years old or 40.
In 1960, FHA mortgages were 4.6%, VA-backed mortgages were 4.5%, and the average mortgage rate was 5.1%.
According to recent data, the average length of time people spend in their first home before purchasing their second is about 7-10 years. This can vary based on a variety of factors, including job stability, family size, and personal preferences.
If you can easily afford it, you should probably put 20% down on a house. You'll avoid paying for private mortgage insurance, and you'll have a lower loan amount and smaller monthly payments to worry about. You could save a lot of money in the long run.
Now, however, millennials have achieved something remarkable: they have become a majority-homeowner group. In 2022, the share of millennials owning homes increased to 51.5%, according to a RentCafe analysis of census data.
Renting is often smart if you expect to move again within a few years. Buying and selling homes is expensive, and your home may not rise in value fast enough to offset those costs.
No age is too old to buy or refinance a house, if you have the means. The Equal Credit Opportunity Act prohibits lenders from blocking or discouraging anyone from a mortgage based on age. If we're basing eligibility on age alone, a 36-year-old and a 66-year-old have the same chances of qualifying for a mortgage loan.
Buying a home after 60 can make sense if you have sufficient monthly income and find an affordable home. In addition, if you're physically capable of maintaining the home or can pay for extra help, homeownership won't become burdensome.
Winter is usually the cheapest time of year to purchase a home. Sellers are often motivated, which automatically translates into an advantage to you. Most people suspend their listings from around Thanksgiving to the New Year because they assume buyers are scarce.
NAR forecasts that sales will rise by 13 percent in 2024. “Housing sales are expected to increase a bit from this year,” agrees Chen Zhao, who leads the economics team at Redfin. “However,” she qualifies, “we are not expecting sales to increase dramatically, as rates are likely to remain above 6 percent.”
Even if you've been renting all your life, it's not too late to own a house.