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…
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