B4 • Friday, March 10, 2023
thegardenisland.com
THE GARDEN ISLAND
HIGH INTEREST RATES
Higher prices Low inventory, however, isn’t the only reason home prices remain elevated. Inflation has also pushed home
buy homes, the changing market has brought some relief. Buyer competition is no longer seen as a barrier to homeownership. Just 29 percent of millennials say it’s an obstacle now, compared to 59 percent in 2022. “We’re not seeing those huge over-asking prices and escalating bidding wars,” I owe Arceneaux explains. MillenA significant debt burden nials may be willing to take is further leveraging millenrisk to own a home, but they’re also looking for triednials’ struggle to save for a and-true ways to make the down payment. Almost half of the millennial buyers sur- purchase more affordable, such as working with a veyed by Real Estate Witch low-commission real estate admit they are $10,000 in debt, and almost 20 percent agent or an agent who offers a homebuyer rebate. owe $50,000 or more. “There’s a lot more seller To save money, millenniconcessions being offered als may opt for more dated now that you didn’t see in homes that tend to be less expensive — although fewer 2020 and 2021. Sellers are more willing to negotiate, are betting on fixer-uppers. and sometimes, they may Nearly two-thirds of milleneven agree to pay the buynials surveyed by Real Estate Witch say they would er’s closing costs.” buy a home that needed sigThree-fourths of millenninificant repairs — a sharp als think the housing market decrease from the 82 peris in a bubble that could burst in 2023, ushering in an cent who said the same in era of greater affordability. 2022. But experts suggest temper“They’re open to doing cosmetic upgrades like ing that expectation. painting and carpeting, but a “I think (the real estate lot of them don’t want to un- market) may be pretty bordertake major projects ing in terms of prices and inwhen they’re first buying a terest rates,” Ruperto home,” said Kale Corey, prin- replies. “I think we’re going cipal broker at Elevated Liv- to see a continuing stabilizaing in Seattle. tion after the insane market over the last two years.” Not all bad news ••• Although high prices and This article was produced by interest rates make it more Real Estate Witch and syndidifficult for millennials to cated by Wealth of Geeks.
On average, millennials spend just 5 percent to 10 percent on a down payment for homes listed between $350,000 to $500,000. A down payment that small requires buyers to pay private mortgage insurance until they reach 20 percent equity or more.
Mary T. Prenon WEALTH OF GEEKS
In the past two years, skyrocketing home values have priced many millennials out of the real estate market. Now with interest rates hovering around 6.5 percent, millennials face yet another costly barrier to homeownership. About half of the millennials polled say rising interest rates hold them back from homeownership, according to a Real Estate Witch report of 1,000 Americans looking to purchase a home in 2023. Among millennials preapproved for a mortgage, 40 percent said their rate was higher than expected. Not surprisingly, 81 percent of millennials wish they’d bought a home before interest rates increased. “We’re not going back to the 2.5 percent and 3 percent unprecedented rates we saw during the pandemic,” said Davina Arceneaux, owner of Motto Mortgage Services in Chicago. “I don’t think we’re going to see those numbers again for a very long time.” Although rising interest rates have caused home sales to decline, inventory is still so low that prices haven’t dropped significantly.
Millennials’ No. 1 barrier to homeownership
CHARLES KRUPA / ASSOCIATED PRESS
A “For Sale” sign is posted outside a home converted into condominium units on Tuesday, Feb. 7, 2023, in Exeter, N.H. prices higher, and 92 percent of millennials believe it will have a major impact on their home buying plans, according to Real Estate Witch. “Some (millennials) have had to reevaluate what they can afford,” said Anthony Ruperto, team lead at J. Philip Real Estate in Westchester County, New York. “They may decide to look for something smaller or maybe a bit further away than they originally wanted. “They may be commuting to the city only two or three days a week, so they can
U.S. mortgage rate up for fifth straight week to 6.73 percent Matt Ott ASSOCIATED PRESS The average long-term U.S. mortgage rate rose for the fifth straight week to its highest level since breaching 7 percent in November, just as the spring buying season gets ready to kick off. Mortgage buyer Freddie Mac reported Thursday that the average on the benchmark 30-year rate climbed to 6.73 percent from 6.65 percent last week. The average rate a year ago was 3.85 percent. The average long-term rate hit 7.08 percent in the fall — a two-decade high — as the Federal Reserve continued to raise its key lending rate in a bid to cool the economy and quash persistent, four-decade high inflation. At its first meeting of 2023 in February, the Fed raised its benchmark lending rate by another 25 basis points, its eighth increase in less than a year. That pushed the central bank’s key rate to a range of 4.5 percent to 4.75 percent, its highest level in 15 years. Many economists expect at least three more increases before the end of the year. In remarks to a Senate committee earlier this week, Fed Chair Jerome Powell appeared to imply that the Fed would return to larger rates hikes at its next meeting March 21-22. That sent markets tumbling on Tuesday, but Powell seemed to soften his stance on Wednesday during his appearance before the House, saying that Fed policymakers have yet to decide how large an interest rate hike to impose at its meeting in two weeks as it tries to corral high inflation.
look for homes where they’ll be able to get a lot more for their money. In Manhattan, $400,000 may get you a small studio apartment, but in Dutchess County — three counties to the north — you can get a decent-size home for about the same amount.” Still, more than half of millennials said they can’t afford a home.
eroded millennials’ savings, and 54 percent have less than $10,000 in reserve. That percentage has tripled since 2022. What’s worse, 1 in 5 millennials have no money at all in savings. As a result, nearly twothirds of millennials plan to offer less than 20 percent on a down payment for their home, according to Real EsNo money down? tate Witch. That’s twice the One of the other signifinumber of millennial homecant barriers to homeowner- buyers who paid less than 20 percent upfront for their ship is saving for a down home just one year ago. payment. Inflation has