According to Brian Copeland (a Nashville realtor), there used to be a simpler profile of an “A” buyer before the pandemic hit.

Copeland also serves as president of Greater Nashville Realtors. He said that “four years ago, an “A” buyer was someone who could get a loan and had 3% down. An ‘A buyer’ has access to all of the cash today.

He said that top buyers are more than happy to forgo inspections or appraisals, and in many cases they won’t even visit the property in person.

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Copeland said that everyone is suffering, and added that the middle class is experiencing affordable housing.

Price increases

Americans recognize the challenges they face when buying a house. Momentive surveyed more than 7,000 Americans to determine if the U.S. housing market is in bubble. More than 70% believe it is.

Price is a major factor that’s keeping potential buyers on the sidelines – some 38% said they have delayed or canceled plans to buy a home due to inflation. According to the survey, people of color were more likely than others to put off buying a house due to rising home prices.

Jon Cohen (chief research officer, Momentive) stated that “more scuttled plans or delayed purchases among these groups threatens exacerbate already large gaps in homeownership prices along racial/ethnic lines.”

According to the National Association of Realtors data, February saw a 15 percent increase in median home sales prices across the United States.

According to Danielle Hale (chief economist at Realtor.com), mortgage rates have been rising, so buyers who need loans will be paying more.

According to Hale, this can affect younger buyers as well as first-time purchasers. The result is that many people are unable to afford homeownership, which can be a way of building wealth.

“It’s a very competitive market for those who are shopping at the top of their budgets,” said Peter Murray, a realtor and the principal broker at Murray & Co. Real Estate in Frederick, Maryland. “There are many disappointments.”

Money math

If they have spent months searching for a home, some homeowners might be tempted by the prospect of spending more to buy it.

Marguerita Ching, CEO at Blue Ocean Global Wealth Gaithersburg in Maryland, believes that it can be a good idea to increase your budget in certain cases.

She said, “There have been times when I told people that it was okay to stretch. But just be aware of the effect on other areas in your life.”

It might make financial sense to spend a little more on moving if other expenses are lower or you anticipate lifestyle changes that will increase your monthly budget. You could go from having two cars to one or have children going into public school soon, which means you don’t pay as much childcare.

She said that if you have a budget, which is your salary base, without any bonus, then you might be able afford to spend more. There may also be more room if there is no consumer debt and you have adequate savings for retirement.

It is also important to consider how much time you plan on spending in your home. You may want to invest a bit more if you are planning to keep the home for five years or more.

Don’t stretch

However, it may not be a wise decision to spend more on your homebuying expenses in certain situations.

Cheng suggests sticking with the original plan, even if it makes saving money or paying off debt more difficult.

“If that is the only way they can stretch it is to borrow from retirement funds, I’d probably disagree with that,” she stated.

Also, she cautioned that you should not spend all of your savings on a home purchase to pay more. It is important to plan for variable expenses such as insurance, taxes, and repairs.

Cheng also said it doesn’t make financial sense to reduce your income to the extent that you can afford tax breaks. These benefits will disappear, and you could be in serious financial trouble.

If you don’t have the money to pay, what should you do?

There are a variety of options available to buyers who don’t have the budget.

Murray said, “They can either put an end to their home search” or need to adjust their search criteria.

For those who have more time to save, it might be a good idea to exit the purchasing market. It could also be a bad idea, however — if prices continue to rise, you could be further priced out of the market, said Copeland.

Rethinking your list of must-haves may make sense. This includes looking into other neighborhoods. The buyer may have to be open-minded about the condition and size of their home.

Hale also advised that all paperwork should be prepared so that they have the ability to immediately make an offer if they see a home they like.

She stated, “To compete in the market you can throw more money at a problem or be prepared to solve it.”

Cheng stated that homebuyers can benefit from working with financial advisors or planners to help them understand how much they can afford for a house.

Cheng stated that while the loan officer can help structure your loan, the real estate agent will assist you in finding a property. Although you might not think it is necessary to have a financial advisor, they will help you understand how your situation affects.

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