There is an expectation in America that when children grow up and go out into the world they will be able to provide for themselves, every parent’s dream. Part of that is the ability to pay for housing. Yet nowadays, many young people are questioning if they can afford to buy a house in this economy. Worse is the cost of owning a home, which goes way beyond the initial price tag, making home ownership seem like an unobtainable dream for more than just the young adults of society. Below are some of the factors that have increased the cost of home ownership.
The national average sales price of an existing single-family home in the U.S., as of earlier this year, is $375,000. This number could vary greatly depending on where you are looking to buy a home. The current interest rate, depending on your type of mortgage, can range from 6.3% to 7.16%. While these rates are higher than the historically low rates of the past 15 years, they are more in line with the normal range of mortgage rates.
Moreover, the rise in homeowner’s insurance premiums continues to push the dream of owning a home even further out of reach. According to the National Association of Realtors, homeowners nationwide are expected to see a 6% increase in premiums by the end of the year. This is on top of the 20% increase over the previous two years.
The cost of owning a home has surged in the last four years. If someone were lucky enough to have enough cash to pay the full value of a home and eliminate the added cost of paying interest, they would still have the on-going costs of living in and maintaining that home. Expenses such as homeowners’ insurance, property taxes, utilities, and the cost of upkeep and repairs add up very quickly. These costs have gone up by 26% since 2020 coming to about $18,000 per year, with some states paying as much as $25,000.
On top of the rising costs, another obstacle making it difficult for aspiring homeowners is the imbalance between housing supply and demand. The U.S. population grew by more than 1.75 million during 2023, coupled with a push toward urbanization the housing markets in many metropolitan areas is strained. Many cities have seen prices soar way beyond the national average, driven by limited available land for new construction, zoning regulations that restrict development, stricter building codes, and the bloated costs of building materials and labor.
These unfavorable conditions can truly make home ownership seem impossible, but there are steps to take that can help you get your foot in the door. Create a financial plan and a budget then STICK TO IT. One idea, as part of the plan, is to save the difference between rent and home ownership. If rent is $2,000 per month and home ownership would cost $3,000 per month, then save the $1,000 per month towards home ownership.
No doubt, home ownership takes sacrifice, your budget needs to reflect that. The larger your down payment, the smaller your mortgage payments will be. One of the major benefits of owning a home is that the mortgage payment is typically fixed for the life of the loan. Unlike rent which can and often increases over time. Owning a home may seem like a farfetched dream, but through dedication and smart planning, it is possible.
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