Buying a home has become so unaffordable that most prospective homebuyers wouldn’t mind a recession if it meant lower mortgage rates, according to a new survey.
Sixty-four percent of Americans say they are “ready for a recession” if they are better able to afford to buy a home, according to a study conducted by Harris Poll on behalf of Credit Karma, designed exclusively for USA TODAY.
As homebuyers grapple with near 7% mortgage rates and home prices continue to hold firm due to a lack of inventory, the picture is looking grim for those looking to buy a home.
Not surprisingly, 82% of those surveyed believe the country is facing an unprecedented housing affordability crisis. Perhaps that’s why more than 3 in 5 Americans who have never purchased a home (61%) don’t think they’ll ever be able to afford to do so.
The poll was conducted between May 24-26, among 2,053 adults ages 18 and older, of whom 264 have purchased a home in the past two years, and 579 plan to purchase a home in the next three years.
“There is no denying how difficult it’s become to purchase a home in America today, especially for first-time buyers,” said Aniva Hinduja, general manager of home and mortgage at Credit Karma. “When a majority of potential home buyers are wishing for a recession so they can afford a mortgage, you know the situation is dire.”
Affordability challenges for recent homebuyers
Among homeowners who bought in the past year, 46% say they are struggling to afford their monthly mortgage payments due to high interest rates. For those who recently purchased a home, 36% used money from savings, 37% used money from another home sale, 16% paid in all cash and 19% used money gifted from family, Seven percent took an adjustable-rate mortgage and 9% did a mortgage rate buy-down, according to the study.
Prospective buyers should be diligent when budgeting for a home, taking into account how much they’ll pay each month in mortgage interest and factoring in other financial obligations they have at a time when borrowing costs are high, says Hinduja.
“They should also give a lot of thought to what potential risks they’re willing to take on to purchase a home in today’s market,” she says. “For instance, while taking out an adjustable-rate mortgage might ease some of the financial burden at the onset of a loan term, borrowers need to make sure they’ll be able to afford their new monthly payments once their rate switches from fixed to variable.”
Recent homebuyers: Sacrifices and compromises
Eighty-four percent of recent homebuyers (those who purchased in the past year) say they made sacrifices in order to purchase their home, with 3% saying they paid more than they budgeted.
Other sacrifices include:
- Limited/stopped spending on non-necessities so they had more to spend on their home – 25%
- Took on a side hustle to make extra money – 22%
- Gave up certain desired home features (e.g., fenced-in yard, open floor plan, finished basement) – 20%
- Bought a smaller home than they wanted – 23%
About 1 in 5 say they put life events on hold (22%) or bought outside their ideal home location (19%) in order to purchase their most recent home. Roughly 21% of recent homebuyers say they moved in with family/friends to build up savings in order to purchase their most recent home.
Actions prospective homebuyers are willing to take
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“While many prospective buyers face an uphill battle in today’s housing market, compounded by a challenging economic environment, many of them are getting creative with their home buying strategies to ensure they don’t lose sight of the American dream of homeownership,” says Hinduja.
Nearly 2 in 5 prospective homebuyers (defined as those who plan to buy a home in the next 3 years) would be willing to take on a side hustle to make extra money or limit/stop spending on non-necessities so they will have more to spend on a home (38% each) to buy a home in the current housing market. Roughly 3 in 10 prospective homebuyers say they would be willing to do a mortgage rate buy-down (31%) or lock in a mortgage at a higher interest rate than they would like in hopes they will drop so they can refinance (29%) to buy a home in the current housing market.
Roughly 1 in 4 prospective homebuyers say they would be willing to do the following to buy a home in the current housing market:
- Buy outside of their ideal home location – 27%
- Buy a smaller home than they want – 27%
- Get an adjustable-rate mortgage – 27%
- Give up certain desired home features (e.g., fenced-in yard, open floor plan, finished basement) – 23%
About 1 in 5 would be willing to pay more than they budgeted for (19%), put life events on hold (17%), or move in with family/friends to build up savings (17%) to buy a home in the current housing market.
Prospective buyers, particularly first-timers, shouldn’t lose hope in homeownership, says Hinduja.
“Focus on what you can control, like saving money and getting your credit score in good standing, so when the time is right, you’ll be in a good position to buy,” she says. “Market conditions aren’t permanent, and eventually it should correct itself, you just have to focus on getting your finances in good shape so you can move fast when the time is right.”
Swapna Venugopal Ramaswamy is a housing and economy correspondent for USA TODAY. You can follow her on Twitter @SwapnaVenugopal and sign up for our Daily Money newsletter here.
