Yahoo Finance 4 Smart Things Middle-Class Homebuyers Can Do To Compete in the 2024 Housing Market
The housing market is continuing to be extremely difficult for many homebuyers. A combination of high prices, soaring rates and low inventory is making the road to homeownership very tricky for many Americans.
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And it can be especially tricky for the middle class. So how difficult is the housing market, and what can middle-class homebuyers do to compete in this market?
A Tough Housing Market for the Middle Class
As of May 9, the average 30-year mortgage rate stood at 7.09%, according to Freddie Mac. An environment with rates above 7% affects both sellers and buyers, it stated. “These elevated house prices add to the overall affordability challenges that potential buyers face in this high-rate environment,” according to Freddie Mac.
The income needed to afford a home is rising now. Indeed, according to Realtor.com’s April Housing Report, the household income required to purchase a median-priced home in the U.S. was $116,000 — an increase of $5,900 from a year ago. In addition, the report found that a household income of more than $200,000 is needed in six metro areas across the U.S., and California’s major cities lead the pack.
Middle-income households are those with an income that is two-thirds to double the U.S. median household income, according to Pew Research Center. And the median household income in the U.S. in 2022 (the most recent data available from the U.S. Census Bureau) was $74,580.
So with the household income needed to purchase a home oftentimes outpacing middle-class incomes, what can middle-class homebuyers do to compete in this market?
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Pay Off Debt
According to financial expert Rachel Cruze, the main thing burdening would-be homeowners is the amount of debt they have.
“When you’re already making such big payments every month, it’s almost impossible to fit a house into your budget. That’s why focusing on paying off your debt before buying a house is such a good idea — it’s a major step toward making homeownership more affordable,” she said in a Ramsey Solutions article.
In turn, she urged consumers to use the snowball method. “Once your smallest debt is gone, take what you were paying on it and add that to your payment on the next-smallest debt until it’s gone too. Repeat the cycle until each debt is paid in full and you’re completely debt-free!” she said.
Relocate Somewhere Cheaper
Another option is to relocate somewhere more affordable.
“Luckily, you may not have to move very far to see a major discount in the cost of buying a house,” Cruze said. “After all, lots of expensive major metropolitan areas have much cheaper cities or suburbs within an hour’s drive.”
However, it’s important to thoroughly plan for this move ahead of time, Cathy Curtis, a financial planner, told Kiplinger. You should research not only the housing costs but also property taxes, home insurance rates and more to determine whether your move will actually end up saving you money.
Increase Income
To make homeownership a reality, you can try to increase your income, according to Cruze.
There are many ways you can increase your income. Some of them include taking surveys online, getting cash back from apps, tutoring online, and driving for Uber or Lyft, said financial expert George Kamel on the Ramsey Solutions website.
Save More Money
In some instances, it’s better to continue to rent instead of being burdened by the costs of homeownership, Cruze said. Doing so can help you save more money to buy a house down the line.
“If you want to buy a home in a pricey market, waiting and continuing to save money may be your smartest move. Your area may seem more affordable three years from now when you have a hefty down payment saved,” she added.
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This article originally appeared on GOBankingRates.com: 4 Smart Things Middle-Class Homebuyers Can Do To Compete in the 2024 Housing Market
