Yahoo Finance Why younger Americans think the dream of homeownership is just a 'mirage' — and 3 ways to keep the dream alive
The American Dream, at least for a substantial number of homeowner-hopefuls, has dissolved into an American Mirage.
Take Stela Bermema, for example — a newlywed who currently rents a place with her husband and would love to set down roots in the Tampa Bay, Florida, area.
Don't miss
Cost-of-living in America is still out of control — use these 3 'real assets' to protect your wealth today, no matter what the US Fed does or says
Car insurance rates have spiked in the US to a stunning $2,150/year — but you can be smarter than that. Here's how you can save yourself as much as $820 annually in minutes (it's 100% free)
These 5 magic money moves will boost you up America's net worth ladder in 2024 — and you can complete each step within minutes. Here's how
However, Bermema and her husband are facing the same issues as many other first-time homebuyers in America — low home inventory, high mortgage rates, increasing property taxes and significant upticks in home insurance rates.
"I feel suffocated in every corner, everywhere I look," she lamented in an interview with Fox News' America Reports. “It feels very out of reach right now. It's like a mirage.”
She also remarked on creeping property taxes, in addition to inventory, mortgage and insurance issues. “That's why I've kind of coined the term ‘quadruple quandary,’” Bermema said. “It's no longer [just] a triple threat anymore."
The end of the homebuying dream?
The “quadruple quandary” that Bermema refers to isn’t just a Sunshine State issue. Bustling cities such as Chicago have also seen county tax hikes for residential properties.
For example, more than 80% of Cook County residents saw an increase to their property taxes in the last year, while single-family homeowners in the suburb of Melrose Park suffered a whopping 134% increase in late 2023.
Meanwhile, residential property values in Philadelphia rose 31% on average, citywide, for the 2023 tax year.
Bermema and her cohort of homeowner-hopefuls don’t exactly need another dose of bad news, but even if mortgage rates and home inventory improves, those high tax rates aren’t about to follow suit any time soon — and that may prove the difference between being able to afford a home and waiting even longer in renters’ purgatory.
Mortgage rates have fallen slightly from the 7.79% peak in October 2023, according to the Federal Reserve Bank of St. Louis, where it sits at 6.87% as of June 2024.
But homeowner-hopefuls may want to rein in rising hopes: the Mortgage Bankers Association's annual forecast suggests that 30-year mortgage rates will only drop slightly more into the 6.5% to 6.9% range throughout the remainder of 2024.
Although inflation has dropped in recent months to 3.3%, it’s still well above the Fed’s 2% target. Meanwhile, shelter rose, creeping up 0.4% for the fourth consecutive month.
Read more: Thanks to Jeff Bezos, you can now use $100 to cash in on prime real estate — without the headache of being a landlord. Here's how
Three ways to revive the homebuying dream
But not all hope is lost — there are some ways to keep your home buying dream a reality.
Broaden the definition of “everywhere I look"
During her Fox News interview, Bermema expressed frustration at the lack of inventory and soaring property taxes — however, she may benefit from broadening her search.
The average Tampa home value is $386,957, up 5.3% in the last year, according to Zillow.
But compare that to Milwaukee, for example, where the average home value is $208,972, even after increasing by 9.5%.
Of course, Milwaukee isn’t Tampa Bay, and may not suit Bermema’s personal goals or career aspirations. However, it may be worth considering a more cost-effective city that still offers plenty of amenities and job opportunities.
In fact, Forbes ranked Brew City as the seventh most affordable city to buy a home in 2024.
Consider buying a home with a friend or relative
Granted, this isn’t an ideal option for everyone, but if you’re on the same page with a relative or friend, buying a home with another party could be a viable option for getting into the housing market.
Pooling your money together can give you a head start on buying larger property much sooner than you could have done individually. Investing with a non-romantic partner can also help boost your capital and borrowing capacity.
In Tampa, where Bermema wants to live, Redfin listed at least eight homes that could fit more than one family in the $350,000 to $950,000 price range with five-plus bedrooms and four-plus baths.
Even if that second family you’ve recruited can’t afford a home just yet, that may mean a long-term renter under your roof that can help offset the mortgage payments.
However, co-owning property (or renting it out to a friend or relative) can complicate your real estate investing journey, so it’s something that shouldn’t be decided on hastily.
Give yourself financial breathing room
The realities of the current housing market could be offset by trimming expenses on major capital expenditures in other areas.
For example, the average cost of a new vehicle comes in at $33,300 per AAA statistics, so financing that car can get expensive.
The average auto loan debt also grew 5.2% to $23,792 in 2023, according to Experian. However, if you own a paid-off used car, it could wipe out an average of $2,000 in monthly expenses.
That’s nearly enough “saved” to make $2,000 on a $2,600 mortgage payment — assuming a $400,000, 30-year mortgage at current rates, per Google’s mortgage calculator.
What to read next
Kevin O'Leary explained how you can live off $500K and 'do nothing else to make money' — but is it realistic for your retirement?
'The odds were stacked against me': How Don Wenner built a $5 billion real estate business that's helping people reach their American dream
'You didn't want to risk it': 80-year-old woman from South Carolina is looking for the safest place for her family's $250,000 savings. Here's Dave Ramsey's response
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
