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It may come as no surprise that among millennials who have intended to buy a house this year, 92% said in a recent survey that inflation has impacted their goal.
Yet most of them aren’t letting it serve as a roadblock, according to the survey from Real Estate Witch, an education platform owned by real estate data firm Clever.
While 28% of those millennials are delaying their buying plans, the remainder say they’re responding by saving more money for the purchase (59%), spending more than expected (36%), buying a fixer-upper (26%) and buying a smaller home (25%).
Millennials — who are roughly ages 27 to 42 — are in their prime homebuying years. The typical first-time buyer was age 36 in 2022, up from age 33 in 2021, according to the National Association of Realtors.
Last year, first-time buyers made up 26% of home purchases, compared with 34% in 2021. The combination of year-over-year double-digit price jumps for much of 2022 and rising mortgage rates created an affordability problem for many buyers.
However, the situation is gradually improving as home prices continue sliding. The median price for an existing house was $366,900 in December, just 2.3% higher than a year earlier and down from $370,700 in November, according to the Realtors association. Last June, the median price was $416,000 — 13.4% higher than in June 2021.
Additionally, interest rates on mortgages have eased. The average for a 30-year fixed-rate loan is 6.21% as of Jan. 24, according to Mortgage News Daily. That compares with 7.32% in late October. As buyers know, the higher the rate, the more their monthly payment is.
While it’s impossible to predict where rates will be as the year progresses, experts say buyers shouldn’t wait around for mortgage rates to drop to where they were in 2020 and 2021 — below 3% or not much over it — because it’s unlikely to be seen again anytime soon.
Rates were that low due to emergency actions taken by the Federal Reserve to prop up the economy in the wake of the Covid pandemic hitting the U.S. in 2020.
“Those were unusual circumstances,” said Lawrence Yun, chief economist for the National Association of Realtors.