Limited housing supplies are forcing prospective homeowners to make significant compromises, such as devoting less money to saving for emergencies and retirement, a new survey says.
According to a study commissioned by Owners.com, an online brokerage, about 60 percent of consumers said saving for a home takes priority over saving for an emergency or retirement, and 72 percent said it would limit their contributions to other investment funds.
Although most consumers prioritize homeownership, the lack of affordability is a cause for concern. According to the survey, 69 percent of consumers fear not having enough cash for the downpayment.
Besides cutting back on other savings, the survey respondents are willing to downsize their dream homes: 51 percent would consider buying a fixer-upper, while 36 percent are willing to purchase a smaller home than what they prefer.
"Constrained inventory in many areas and climbing rents, home prices and mortgage rates means it's not getting any easier to be a first-time buyer," says Lawrence Yun, chief economist of the National Association of Realtors. "It'll take more entry-level supply, continued job gains and even stronger wage growth for first-timers to make up a greater share of the market."
Home buyers are getting squeezed by several forces. Total housing inventory in December was 6.3 percent lower than a year ago and has fallen for 19 consecutive months, NAR says. The supply crunch is pushing up prices, with the median price of an existing home up 4 percent year-to-year.
And 30-year mortgage rates have risen to 4.19 percent recently from 3.47 percent in late October, increasing monthly payments. Also, despite the growing housing demand and strengthening economy, home construction is still stuck modestly above recessionary levels.
Even with the challenges, however, experts say homeownership is still a better deal than renting.