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Navigating Today’s Housing Market: What Young Buyers Need to Know

By Abbey Henderson, CFP®, RLP®, CAP®, AEP®

Buying your first home is an exhilarating milestone, but in today’s market, it can also feel overwhelming. This journey is quite different for your parents, which makes approaching the decision with a clear strategy essential (and it’s likely why they shared this article with you.)   

 Whether you’re saving for a down payment or exploring potential financial support from family, let’s take a closer look at what you need to know to make a smart first home purchase. 

 Renting vs Owning 

You may have heard that rent is throwing money away, but a more nuanced perspective can help. While homeownership certainly builds equity and can contribute to long-term wealth, rushing into the wrong home can be far more costly. 

Buying a home that requires significant, unforeseen repairs, or one that quickly depreciates in value, can drain your resources and create more stress than it’s worth. In a market with elevated prices and higher interest rates, extending your time as a renter can often be a financially prudent strategy while you build savings and wait for the right opportunity. 

 Sometimes, continuing to rent while building a stronger financial foundation or waiting for the right opportunity is the most intentional choice for your financial well-being. 

Interest Rates 

Interest rates shape the housing market. They directly impact your borrowing power and monthly payments, making affordability a key concern for many first-time buyers. 

Even a small percentage shift can significantly alter your long-term costs. For example, a $300,000 mortgage with a 30-year term at 6.9% interest results in a principal and interest payment of about $1,974 per month. If that rate were to drop by just one percentage point to 5.9%, your monthly payment would decrease to roughly $1,777, saving you nearly $200 each month. 

Be aware of different rate types. Loans with an adjustable rate or those that are interest-only might seem more budget-friendly right away because they can offer lower payments in the short term. But these types of loans can lead to complications further down the road, such as sudden increases in your monthly payments. 

Homeownership Costs 

The price of a home is just the beginning. Homeownership involves a range of ongoing expenses that can surprise unprepared buyers. Beyond your mortgage payment, you’ll need to account for: 

  • Property Taxes: These vary significantly by location and can change over time. 
  • Homeowner’s Insurance: Essential for protecting your investment against unforeseen events. 
  • Maintenance & Repairs: From routine upkeep to unexpected fixes, these costs can add up quickly. It’s often recommended to budget 1-3% of your home’s value annually for these expenses. 
  • Utilities & HOA Fees: Depending on the type of home, these can be substantial. 

Be aware of these costs upfront to create a realistic budget that avoids future strain. 

The Emotional & Financial ROI 

While the return on investment of your first house is financial, it’s also deeply emotional. Your home is a space that truly serves your life’s purpose and contributes to your overall well-being. By planning intentionally, you can ensure it’s a source of joy. 

 Approaching your financial decisions with mindfulness, clear understanding, and perhaps the support of a trusted advisor, can make all the difference. If you’re ready to design your roadmap for an exceptional life, we’re here to help 

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