Don’t let lower home affordability deter homeownership goals
Many Americans are on the fence about whether to purchase a home, namely because a large percentage are still feeling the effects of the recession. Others may carry concerns that the economy has not yet gained enough strength to make such a large investment, despite record low mortgage rates. The results of a new report may only make some Americans more hesitant to buy property in the near future.
The latest data reveals that home prices grew stronger during the second quarter of 2012, making home affordability more challenging for many U.S. households, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index. The results reveal that 73.8 percent of new and existing homes sold during this period were affordable to Americans earning a national median income of $65,000, compared with 77.5 percent in the first quarter.
Analysts say the results are positive for the economy, because rising home prices demonstrate the housing market is healing.
“While interest rates and overall housing affordability remain very favorable on a historic basis, the decline in the latest HOI is a positive development because it is another signal that the housing recovery is starting to take root, and it lends needed confidence to prospective buyers and sellers who have been reluctant to move forward in the current marketplace,” said NAHB chairman Barry Rutenberg.
However, for those who are planning to purchase a home, rising prices can be make affordability more difficult. There are several steps mortgage seekers can take to ensure they find a property that they can manage financially.
The first step is consulting with a credit counselor or enrolling in housing counseling. Working with a professional can help individuals determine what they can afford to pay for a home, and factor in additional costs, such as property insurance, closing costs, monthly maintenance and even furnishings. It’s also important that consumers place a hard limit on how much they are willing to spend for a home. It’s easy for individuals to find a property that is out of their budget and wind up in debt, default or foreclosure down the road.
Adults should also seek out properties in a variety of locations, as home prices may fluctuate by neighborhood and proximity to a metropolitan area. Lastly, consumers who save a significant amount for their down payment will enjoy lower monthly payments and subsequent interest charges over the life of their loan.