What If You’re Priced Out of Buying a Home?

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What If You’re Priced Out of Buying a Home?

Written By: Ashley Sutphin
Tuesday, November 30, 2021

First-time homebuyers are facing a serious problem when it comes to buying a house. While the acceleration may be cooling somewhat, there are still record-breaking rises in home prices. Recent data shows for the first time in the U.S., median home prices surpassed 400,000.

Several factors are likely to continue this trend. There are a lot of motivated buyers, limited housing supply and low mortgage rates. Inflation is pushing prices up for essentially everything, including homes. Low mortgage rates allow buyers to buy more than they would be able to ordinarily, so they can get involved in heated bidding wars.

Sellers are also staying put because they dont want to jump into a highly competitive buying market, limiting the supply of available homes even more.

Homebuilders cant get the materials they need, and even if they can, theres a labor shortage.

Where does this leave first-time buyers or any buyer?

What Does It Mean to Be Priced Out?

If youre priced out in the real estate market, it means that you cant afford even an entry-level home. There are often a number of factors that can lead first-time buyers to be priced out, many of which are converging with one another right now.

If youre trying to buy a house right now, you probably notice the down payment you worked hard to save isnt going as far as you planned. If you saved 20 of the expected price you prepared to pay for a house, that might no longer be sufficient.

So, what can you do?

You might think automatically you should keep renting, but rent prices are going up because of inflation as well, while wages arent keeping up, so this isnt the ideal option.

There are a few things you can do, and none of them might feel ideal, but your options are limited when youre priced out.

Save More

If you live in a market thats not affordable for you right now, you may need to keep renting and adding to your savings. This does also allow you to wait out the market somewhat. You may need to be patient because it could be a couple of years before youre able to re-enter the marketing successfully.

As youre thinking about what you can afford, its better to base it on your monthly expenses rather than the sales price.

If you are setting more money aside and youre going to try and wait out the market a bit, dont just put it in a standard savings account. You may need to put at least some of your savings into riskier but more high-earning options like stocks.

Change Your Expectations

Another option you have available when youre otherwise priced out of the market is to change your expectations. With limited inventory and all the other factors going on in the market right now, you may have to give up a few things on your wish list, or maybe more than a few.

You could end up buying a fixer-upper thats more in line with your budget.

For first-time buyers, being humble is key to getting a home in the current environment.

Broaden Your Home Search Geographically

Just like you might need to give up on some of your wish list as far as home features, you might also want to broaden the area where youre looking geographically. There can be considerable differences in the price of homes from one neighborhood to the next or one suburb to the other.

Many people arent just moving out of urban areas to be able to afford a hometheyre changing cities altogether. For example, residents of expensive locations like New York and San Francisco are moving to more affordable cities like Austin and Atlanta.

Hire a Great Real Estate Agent

Finally, if you dont already have a great real estate agent on your side, it would be nearly impossible to navigate the current market as a first-time buyer without getting one. Even if you can find a home youre able to afford, you may be facing stiff competition.

Real estate professionals know about properties before they go on the market, so youll have an edge there. Theyll also be able to help you understand your local market so you can adjust your expectations as needed.

A real estate pro can negotiate on your behalf and cut some of the stress out of the experience for you.

Its not an easy time to buy a home, but that doesnt mean its impossible. You might wait it out, or you could shift your approach and strategy a bit.

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