There are many hurdles that make it hard to purchase a home right now. From high prices, to multiple offer situations, to low supply, to student loans. There are a myriad of reasons it can be difficult. This makes many people stay on the sidelines because they feel like they can’t compete, or they actually can’t compete. Let’s take a closer look at why this is happening.
- High Prices – the pandemic pushed prices higher in many places due to lack of supply of homes on the market. When you have a lack of supply coupled with increased demand, prices go up. This is the case in the entire Charlotte area with the average price up 18.8% from $316,254 in June 2020 to $375,568 in June 2021. When you widen that out to 2019, you see the average home price is up $75,649 from the $299,919 or a whopping 25% in just two years!
This kind of price increase in this short of a time is difficult even for the best qualified home buyer, especially since wages have not gone up 25% to compensate. Without a correction in the supply of homes, from new builds to existing homes coming on the market, many buyers will be priced out of the housing market for some time to come.
- Multiple Offer Situations – this can be a scary term even for the most seasoned homebuyer. Multiple offers are a gamble. You don’t know if your offer is going to be accepted, and buying a home is an extremely emotional experience for many people so it can feel like too much is on the line and be really stressful. Some buyers are putting offers on over 10 homes right now before they get an accepted offer. This stress can pull a lot of buyers out of the market so they continue to rent or stay in a home that no longer works.
- Student Debt – who knew that getting an education could be a hurdle to homeownership? Turns out that it really affects your debt-to-income ratio. This is a metric used by lenders to figure out how much money they are willing to lend to you. This can determine how expensive of a home you can afford. Coupled with higher prices for homes, some people will find that they cannot compete.
- All Cash Offers – First time homebuyers will have a lot of trouble competing against an all cash offer, especially if they need a loan. This is providing plenty of opportunity for investors with deep pockets to swoop in and secure those homes and turn them into rentals. This is great news for potential buyers who are priced out of purchasing the home as they can potentially rent that same home. They may not have all of the benefits of homeownership, but they will be in the home they want in the area they want.
Many potential buyers are deciding to sit out this crazy market and re-enter when the price of entering is not so steep. When more homes are listed for sale, prices could regulate and it could be easier once again to secure the home of your dreams.