Last spring, Rosalyn Tio and Dave Hung decided it was time to move. The couple, who are in their late 30s, had owned a townhouse in Atlanta since 2017, but Dave’s commute was becoming longer and the house they currently lived in, which included a 4-year-old and a toddler, was becoming a little cramped.
Searching for a house was difficult. “The area we liked the most was on the higher end of our budget,” Tio said. “If it was a good house, it would have been done quickly.”
Expensive property wasn’t the only concern. Rising mortgage rates were also “a big factor,” Tio said. The interest rate you’ll pay to borrow in 2024 will be more than double that of a townhouse mortgage. “I think it’s just a sign of the times. It’s what you have to do,” she said, which made me uncomfortable.
Details: Home ownership once meant stable housing costs. That is in the past.
In the end, the couple came up with an unconventional solution that seemed right. They moved their family into a rental house in their desired area and became landlords, renting out townhouses to tenants. By deciding to rent, we saved nearly $2,000 a month compared to the property we were looking to buy.
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“We are in a new field, and it makes sense to try to feel it before you buy,” Tio said. “I felt it was much easier financially than buying at the higher end of my budget.”
Housing inflation won’t stop
Although overall inflation is trending downward, the housing market is a notable exception.
Of all the expenditures that make up the Consumer Price Index, shelter costs had one of the largest increases in September, rising 4.9% from a year earlier, the Labor Department said Thursday.
The average mortgage payment for existing homeowners hit a record high of $2,070 in August, data provider ICE reported Monday. This was an increase of 7.2% compared to the same period last year.
ICE’s report states, “Even after accounting for income growth, the average mortgage payment now requires about 30.7% of the median monthly income of a U.S. household, a relative percentage that was higher than in 2015. “This is the highest since June.” For those currently on the market looking for a home, the mortgage payment required to purchase a median-priced home as of mid-September was $2,215, or 32.9% of median income. The average for the past 40 years was about 25%.
Homeownership becomes more difficult
Tio and Hun were lucky. Homes purchased in 2017 will continue to appreciate in value, allowing you to accumulate home equity. Rising prices across the housing market have left many Americans completely unable to leave their homes.
Nicholas Martin, owner of Buyer’s Choice Realty on Massachusetts’ North Shore, said the market is “stagnant.” Martin said it feels like everyone is in wait-and-see mode. He expects mortgage rates to be in the 5% range before homeowners feel comfortable putting their homes on the market.
As of mid-summer, 84.2% of homeowners already had interest rates locked in below 6%, and 74.6% had interest rates below 5%, according to USA TODAY’s Redfin analysis. At the beginning of October, interest rates on 30-year fixed-rate mortgages averaged 6.12%, according to Freddie Mac.
See: Would you like to buy a house? 4 unconventional ways to become a homeowner.
“I think we’re happy with the situation for now,” Tio said. “It was one of those realizations. As kids, the ideal was always to buy a house, but we started wondering why. As long as they wanted us, We are happy to rent this. It’s much bigger than any house we could have bought and the kids really check all the boxes. .”
