Potential homebuyers are getting increasingly annoyed about what they consider unreasonably high housing costs. That’s why more are backing out of deals they already cut.
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“We’re seeing nightmare scenarios, where deals are getting canceled at the last minute for the most minute reasons,” says Rafael Corrales, a Redfin real estate agent in Miami.
Across the nation, "nearly 56,000 home-purchase agreements were canceled in June, equal to 14.9% of homes that went under contract that month," Redfin reports. Florida was especially affected, with 17.6% of deals canceled in Miami alone in June.
How can purchasers exit a signed deal? “Buyers often back out during the inspection period because they find something they don’t like, but affordability is really the underlying issue,” Corrales says.
Although inventory levels are gradually rising, home prices have stayed stubbornly high in many neighborhoods across the country. Indeed, throughout the nation, the median home price now exceeds $442,000.
“Affordability remains stretched,” says Ivy Zelman, a stock analyst who tracks the housing industry for investors.
Given the currently breathtaking cost of housing, many prospective purchasers are choosing to wait on the sidelines, hoping for better buying conditions ahead, particularly if mortgage rates finally come down a bit later this year, as some economists predict.
Still, real estate agents point out that the costs of delaying a purchase indefinitely can be considerable, especially for tenants under pressure to renew their leases at higher rental rates.
“You’re rolling the dice if you wait too long to buy,” says Ashley Richardson, a longtime agent with Sothebys International Realty.
Are you a wannabe homeowner seeking to move forward later this year or by early 2025 rather than delay still longer? If so, these few pointers could prove helpful:
-- Schedule an in-person interview with a mortgage lender.
Financial studies show that people save more if they have a concrete objective in mind. But how can you make your home-buying goal more tangible?
Gerri Detweiler, a personal finance expert and author, says one way to reorder your priorities is to visit a mortgage lender to determine how much you could afford to spend on a property and how large a down payment you’ll need.
Once you’ve established your borrowing ceiling, Detweiler recommends you embark on a very limited property search by stopping by a few open houses in the neighborhood you’ve targeted.
“So long as you’re still saving, you shouldn’t go on a big home shopping tour because you could fall in love with a specific home before you’re ready to buy. But getting a quick overview of the market can prove highly motivating to help you save,” she says.
-- Reconsider your current spending habits.
Celia Brugge, a Tennessee-based financial planner, says Americans slip easily into temptation when it comes to discretionary purchases.
“It’s easy to fall into impulse purchases for clothing, shoes or electronics. And eating out is a huge category,” says Brugge, who’s affiliated with the National Association of Personal Financial Advisors (napfa.org).
Brugge urges anyone trying to embark on a savings program for the purchase of a home, or any other major financial goal, to first go through what she calls “the boot-camp period.”
During this initial phase, she suggests you do an inventory of where your money has gone during a recent three-to-12-month period. You can do this by reviewing the entries on your checking or credit card statements and then summarizing your outlays.
Many people use Excel spreadsheets to track their spending. Once you know where your money is going, it’s time to start making cuts in low-priority categories. To help exercise willpower against out-of-plan expenditures, Brugge encourages would-be buyers to give up shopping as a recreational activity.
She says many people find that low-cost social activities, like inviting friends over for a potluck dinner, to be more gratifying than recreational shopping. To stay on track and accountable for their spending, Brugge advises couples to set regular times, as often as weekly, to allocate 15 minutes or so to reporting to each other on their recent spending.
“It’s a huge problem when couples don’t tell each other what they’re spending,” she says.
-- Review your commuting expenses.
Detweiler says many people take their need for a late-model car or SUV as a given. But to save for a home of your own, you may need to downscale your expectations in this category, if only temporarily.
“Owning a new car is not a necessity, though some people treat it as one. And it can be a lot more costly to the budget than people think,” says Detweiler.
Ideally, those with a big savings goal will consider selling a vehicle they own and commuting by rail or bus until they reach their savings goal. Another option is to carpool with a colleague from work. Of course, working from home can save a bundle on commuting costs, and remote work is often possible in this post-pandemic period.
-- Seek to reduce your insurance costs.
Insurance brokers and salespeople can be persuasive when encouraging clients to maximize their coverage. But Detweiler says would-be buyers should examine their spending in this domain. For instance, you might find a way to reduce the cost of your car insurance policy without compromising your core coverage.
“Shop around for insurance and also look into how much you could save by increasing your deductibles,” she says. (To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)