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Homebuyer Expectations Have Plummeted: Here’s How You Can Buy Your Dream Home


With short supply of houses and mortgage rates on the rise, it’s understandable that potential homebuyers may feel like their dream home is drifting out of reach. The Federal Reserve Bank of New York recently released the results of its annual Survey of Consumer Expectations, and survey respondents confirmed that potential house hunters exhibit the most pessimistic outlook since 2015.

Even so, if you’re thinking of buying a new home and want the best deal for your situation, here are a couple considerations you can take into account–no matter how doomed the house search may feel at the moment.

The mortgage rate environment is more volatile now than ever. Check out SmartAsset’s mortgage rates table to get a better idea of what the market looks like right now.

A financial advisor could also help you determine which financing options benefit you the most and how mortgage debt may be leveraged to your advantage. Find a qualified advisor today.

Homebuyer Expectations Reach Lowest Level Since 2015

In April, the Federal Reserve Bank of New York released its 2022 Survey of Consumer Expectation Housing Survey results. The survey showed that households expect housing prices to continue their precipitous growth over the next 12 months, both for home sales and renting.

Households expected home sale prices to jump another 7%, up from 5.8% in the previous year’s survey. As a result, the expected probability of moving in the next three years fell 8%, marking the lowest expectation of buying a new home since 2015. Renters also exhibited some negative sentiment, with only 43.3% of renters expressing a probability of owning a home in the future.

On average, households perceived that mortgage rates remained unchanged compared to pre-pandemic levels, but expectations were high for future increases. According to the survey, respondents estimated average mortgage rates to rise to 8.2% in three years’ time.

What Potential Homebuyers Can Do

SmartAsset: Homebuyer Expectations Have Fallen Sharply. Here’s What You Can Do to Buy Your Dream Home.

The 2022 Survey of Consumer Expectations expresses the generally negative sentiment regarding buying a home, but it’s important to keep in mind that these are measurements of consumer feelings. For example, surveyed households expect mortgage rates to rocket above 8%, but the Mortgage Bankers Association (MBA) said that “mortgage rates are expected to end 2022 at 4.8% and to decline gradually to 4.6% by 2024 as spreads narrow.” Also, consumers may expect housing prices to climb for the next twelve months, but the five-year growth is expected to average only 2.2% per year.

With rising mortgage rates and short supply of housing, there are a couple options that potential homebuyers should consider to maximize their dollars.

First, consider discussing a rate lock with your mortgage lender. A rate lock on a mortgage loan means your interest rate won’t change once you’ve put in your offer, so long as you close by a specified date and there are no further changes to your application. Given that mortgage interest rates change daily and sometimes even hourly, having a locked-in rate with your offer can guarantee the best deal for your situation. Make sure to ask if your lender also offers a float-down option if you think mortgage rates may fall before you close.

Another consideration may be adjustable-rate mortgages (ARMs). These types of mortgages generally come with a fixed interest rate for an initial period of time and then adjust to the market rate thereafter. While ARMs are not particularly beneficial when rates are low, they can be helpful if you believe that mortgage rates will fall again in future. An alternative approach would be to refinance when rates lower once more.

While competition is fierce for move-in ready homes, it may also be beneficial to consider offering for a home that needs some care. Although fixer-uppers may not have seemed like a good choice when lumber and materials were scarce, investing in a less-well-maintained home may provide an opportunity for you as a potential homebuyer.

The current housing environment may not be for everyone, and waiting for more supply and lower mortgage rates is certainly an option. If in doubt, speak to an expert who can help you decide what options would work best for your financial situation.

Bottom Line

SmartAsset: Homebuyer Expectations Have Fallen Sharply. Here’s What You Can Do to Buy Your Dream Home.

Homebuyer expectations have fallen to the lowest levels since 2015, with less than half of surveyed renters expressing confidence in their ability to buy a home in the future. The combination of inflation, rising interest rates and short housing supply has combined to create a difficult atmosphere for potential buyers. However, to make the most of the situation, homebuyers should consider different options for financing as well as types of housing that may not appeal at first glance. If in doubt, speak with an expert to discuss your best options.

Mortgage Tips

  • Not sure which mortgage options are the right choice for your long-term financial goals? Consider speaking with a qualified financial advisor. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Use SmartAsset’s free mortgage calculator to get a good estimate of how much house you can afford.
  • The mortgage rate environment is more volatile now than ever. Check out SmartAsset’s mortgage rates table to get a better idea of what the market looks like right now.

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