Strategies for Navigating the Current Housing Market

If you’re feeling priced out of the housing market, you’re not alone. In 2023, the median sales price of an existing home reached a record high of $389,800, according to the National Association of Realtors (NAR). Coupled with low inventory and the lowest number of existing-home sales since 1995, it’s a challenging time to be a homebuyer. However, all is not lost. There are several strategies you can employ to navigate these tough times and still work towards your goal of homeownership. Here are seven actionable steps to consider.

Give Yourself More Time

Sometimes, pausing your home search can be beneficial. Market conditions are always changing, and many experts predict that mortgage rates will drop in 2024. Lower mortgage rates could encourage more homeowners to list their properties, thereby improving inventory shortages. This could make it more affordable for you to buy a home and give you more breathing room in your emergency fund and retirement savings.

Keep Saving Money

More time also means more opportunities to save for a down payment. In 2023, the typical first-time buyer made a down payment of 8%, the highest since 1997, according to NAR’s 2023 Profile of Home Buyers and Sellers. On a $389,800 home, that’s $31,184. In very competitive areas, a down payment closer to 20% is often more desirable. Automating your savings and setting aside windfalls like bonuses, gifts, and tax refunds can help you reach your goal faster.

Pay Off Debt

High mortgage rates make it crucial to lock in the lowest interest rate possible. One way to do this is by paying off debt, especially revolving debt on credit cards and lines of credit, which can help increase your credit score. Reducing your debt-to-income ratio (DTI) is also beneficial. Mortgage lenders typically want to see a DTI of 43% or less, and with a DTI of less than 36%, you’ll be in an even better position to secure a low rate.

Stay Connected to Your Agent

Don’t lose touch with your real estate agent. They are a valuable resource for keeping tabs on the areas you want to buy in. Just because there’s nothing in your price range now doesn’t mean something won’t hit the market in a few months. If you or your partner suddenly get a raise and have more cash to work with, staying close with your agent can help you act quickly when a suitable property becomes available.

Expand Your Search

Flexibility can go a long way in a low-inventory housing market. Consider changing up your search criteria. Can you work with fewer bedrooms or bathrooms? Is there a geographic area you previously skipped over? Would an additional 10 minutes of commute time be acceptable? While it’s helpful to have deal-breakers, being flexible can open up more options for you.

Stick With Renting

It’s okay to continue renting, potentially for several more years. Putting homeownership into a global perspective can be helpful. In the fourth quarter of 2023, the U.S. homeownership rate was 65.7%, according to the Federal Reserve Bank of St. Louis. However, in countries like Colombia, Germany, and Switzerland, renting is more common than owning, according to 2022 research by the Organisation for Economic Co-operation and Development.

With mortgage rates and monthly mortgage payments so high, renting may not be such a bad deal. From 2020 to 2023, the typical monthly mortgage payment on an existing single-family home bought with a 20% down payment more than doubled, according to NAR.

Apply for Homebuying Assistance Programs

If you haven’t yet looked into state or federal homebuying assistance programs, now is the time to explore your options. First-time homebuyers, in particular, may have several options available in their city or town. FHA, USDA, and VA loans can also get buyers in the door with low down payment mortgages. State and federal down payment assistance programs may also be available depending on your income.

The Bottom Line

While it might be disheartening to recognize that you can’t afford a home right now, it’s likely only temporary. Stick to your plan and continue to take steps to meet it. Every extra dollar you save, every extra point added to your credit score, and every additional home that shows up in your search brings you closer to your goal. And if you decide to keep renting for a while, know that’s a worthwhile option too.

At O1ne Mortgage, we understand the challenges of the current housing market and are here to help you navigate them. Whether you’re looking to save for a down payment, pay off debt, or explore homebuying assistance programs, our team is ready to assist you. Call us today at 213-732-3074 for any mortgage service needs. We’re committed to helping you achieve your homeownership dreams.