Financing a home is now more expensive than it has ever been, even as the price of homes has stabilized, according to a new report from realtor.com.
The challenge homebuyers are facing is that as mortgage rates near 8 percent, the cost of financing a home is out of reach for many Americans.
Realtor.com points out that the monthly cost of financing 80 percent of a home has gone up $166 a month compared to last year, a new record. This means that to buy a home, household income needs an additional $6,000 more to at least $120,000 a year.
"Home prices are flat, but because mortgages have gone up so much, the cost of buying a home is still up. So it's at a record high," realtor.com chief economist Danielle Hale, told Newsweek. "So it's very expensive for people to buy a home. Despite that, you know, we're still seeing prices stay flat."
Part of it is due to a low supply of available homes for sale and this inventory shortage continues.
"It's keeping the market at a relative state of balance which is probably good for existing homeowners, but it means that first-time buyers who are hoping to get a break on pricing are probably going to be a little bit disappointed," Hale said.
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One approach buyers may take is to look for opportunities during the cooler seasons of the year as the market tends to be less competitive. But Hale offered a caveat to that strategy as there also tend to be fewer sellers.
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"Sellers kind of anticipate that lower level of buyer activity and so some will choose to hold off until the spring," Hale said. "Some people don't want to deal with the hassle of having to do home showings in the middle of the holiday season."
Yet, there was evidence that things may be different this year. While there were fewer homes for sale this October compared to last year, available homes were up 5 percent from September. But prices may still not be as attractive.
"Prices are still high, so I don't want people to get the impression they're going to get a huge steal on home pricing, but there are little signs of improvement for buyers in the market," Hale told Newsweek.
Midwest has the supply
The Midwest offers the best opportunity for buyers and Chicago could be a decent option for buyers, Hale said.
"You can be located in a major metropolitan area like Chicago for instance, with the home price that's below the U.S. median and a lot of other cities in the Midwest are where shoppers can get the biggest bang for buck," Hale said. A median listing price in the Chicago area comes at $370,000, which is lower than the national median list price of $425,000, according to realtor.com.
These markets are also getting competitive because of their relative affordability, however.
"A lot of those areas are also seeing prices go up because the affordable level of home prices has kept buyer interest relatively high in those markets," Hale pointed out. "So it really just depends on what buyers are looking for. If they want to prioritize a low price today or if they want to prioritize kind of getting a discount over what were recently high prices in some of these markets that were overheated and are starting to cool."
One bright spot sellers may be starting to lower prices to get buyers in. The national median list price did decline in October to $425,000 from $430,000 in September, realtor.com data showed.
"We're starting to see a greater share of sellers willing to reduce prices if they're not finding a buyer," Hale said. "That could signal some softening in prices ahead, potentially."
Hale added: "When we saw this happen last year, we did see prices come down. So that's one potential optimistic outcome for home shoppers who are tired of seeing prices continue to go up."
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