Even though Halloween is behind us, today's housing prices are more than enough to give potential homebuyers a jumpscare.
At least, that’s what happened to TikTok user @sarahjilllutz, who goes by Sarah. She posted a TikTok describing the agony of trying to find an affordable house in the tri-state area for herself, her husband and their baby girl.
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“We would just have to work, work, work to pay off our mortgage,” the Long Island mom says. “We want a better life than that.”
Sarah says she currently has no room for a nursery or place to keep her daughter’s books and toys. But even though her nursing income combined with her husband’s occupational therapy income affords them a good life, they still can’t afford the houses in and around New York City.
Sarah says she sees houses going for $50,000 or $100,000 over asking. But if you’re determined to get into a new home, does that mean now’s a bad time to buy?
Look at the market factors
Sarah isn’t alone in thinking it’s a bad time to buy. The same feeling holds with 84% of consumers, according to an October 2023 Fannie Mae Home Purchase Sentiment Index.
Home sales in September fell 15% from the same time the year before, reports the National Association of Realtors (NAR). NAR Chief Economist Lawrence Yun blamed “limited inventory and low housing affordability” for the decline. A growing inventory of homes suggests buyers can afford to be more picky than even a few months ago.
Plus, increased interest rates — which have led to increased mortgage rates — have helped shift the market in favor of buyers by suppressing demand slightly, giving eager buyers an opening to negotiate with sellers.
But before you start going to open houses, whether you’re a first-time homebuyer or this isn’t your first rodeo, make sure that you can get pre-approved for a mortgage. You don’t want to find your forever home only to realize that you can’t afford it. Getting pre-approved for a mortgage will mean that you can create a more comprehensive budget for your home buying.
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Do you have enough savings?
Sarah and her husband currently pay $3,850 to live in a one-bedroom apartment in Long Island, New York and it’s adding up.
“We’re just blowing away our savings in this apartment,” she says.
Though down payments can vary, Sarah realizes that she needs to aggressively save to afford her dream home. To figure out if you’re ready to start looking at home, personal finance celebrity Ramit Sethi has this tip for you: “If you haven’t saved a 20% down payment, you’re not ready to buy a house.”
This number will save you a lot of money in the long-term, by first making you attractive to lenders, which will then make the mortgage process far less stressful and time-consuming. Plus, when you finance less upfront, you’ll end up saving a ton on interest payments.
Many young people are having trouble saving for a mortgage these days even if they have well-paid jobs, like Sarah and her husband. While there’s not much you can do about rising prices, a savings calculator can help you figure out a plan to save up enough wealth to purchase your dream home.
Pick — or change — your locale
Moving to a new state or sity is one way people can save on rent and find a cheaper cost of living. The Council for Community and Economic Research notes that the cost of living in Manhattan, New York, is more than twice the national average, while Brooklyn is about 59.7% more expensive.
Many comments on Sarah’s video encourage her to move out of the New York area to cheaper cities in Ohio or Georgia. But Sarah has been telling her TikTok followers for a while that she wants to stay in the tri-state area since her family is nearby and can help with child care.
Sarah’s right that moving away could end up costing her more than relying on family to help her care for her daughter. Child care can run you around $10,000 a year for just one kid.
Places like Alabama and Oklahoma may have lower housing costs, but may also come without the resources you need to afford that housing, like a high-paying job or nearby family to help care for your kids.
If you decide to stay in a more expensive housing market and you just can’t swing a down payment, don’t fret. You can still build wealth by renting by investing more and paying down loans, without having to worry about your mortgage — and all the costs that come along with owning a home.
Ultimately, it’s your choice if you want to buy right now. But it’s an easier choice to make when you have the full picture.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.