Home Buyers Optimistic, Stressed in Current Housing Market

Cautiously optimistic borrowers

Between lacking affordability and not enough for-sale options, house hunters continue to face a challenging landscape.

Despite that, two thirds of mortgage borrowers believe buying a home is attainable under the current market conditions, with 38% likely to purchase a property in the next year, according to TD Bank.

However, optimism and the stresses of home buying vary across the different generations.

How homeowners and buyers are feeling

The surging costs of living, paired with ballooning property values, made for a tough home buying environment over the last few years.

Though, perhaps due to improving conditions, borrowers project positive outlooks. A 67% share of homeowners believe buying a house is an achievable goal right now, according to a TD Bank survey of 1,806 U.S. borrowers.

This enthusiasm spread across the majority of borrowers, but skewed higher for younger ones. An 84% of Gen Z see home buying as doable, compared to 68% of millennials, 66% of Gen X and 59% of baby boomers.

“Although many of the challenges impacting homeownership are leaving some homeowners weary about the market, it’s great to see borrowers, especially younger generations, remaining steadfast in navigating the market to find a home that works for them and their budgets,” said Steve Kaminski, head of U.S. residential lending at TD Bank. “Owning a home is still an important wealth vehicle for any generation and it’s reassuring that homeowners continue to see the value in this type of investment.”

Borrowers are also realistic in their home buying pursuits. Due to wrestling with higher costs of living, 73% increased their house hunting budgets. Rising home prices in their area, high mortgage rates, and not enough options in their price range were the top reasons why. Moreover, 70% of those surveyed said the rising costs of homeownership — utilities, insurance, taxes, repairs — weakened their savings and budgeting abilities.

While homeowners are optimistic, the process of searching for and buying their latest property wasn’t easy. A 71% share found it stressful, going as high as 82% for Gen Z, 78% for millennials, 71% of Gen X, and as low as 60% for baby boomers.

Home buying knowledge is home buying power

Of course, doing the prep work before trying to buy a house will give you a leg up on the competition and often help you when you’re ready to make an offer.

The survey showed home buyers had big gaps in their financial literacy. A 43% share of borrowers said they needed education and guidance during the mortgage process, 24% had trouble with figuring out the optimal mortgage for them, 18% needed the most help in initial research stages, while 15% needed it most during closing. Additionally, 39% were unfamiliar with affordability and loan programs,

Down payments offer a good example of perception versus reality and how being in the know can be advantageous. The idea of needing to put down at least 20% may be the old standby, but it’s an antiquated notion that shouldn’t be an obstacle to homeownership. The median U.S. home buyer puts 13% down.

Saving up for a big down payment isn’t always feasible and more home buyers are realizing this. The report revealed an 80% share of Gen Z borrowers, 77% of millennials, 60% of Gen X and 44% of Baby Boomers put down less than 20%.

You typically have to pay private mortgage insurance (PMI) if you put down less than 20%, but there are ways to avoid it. Fortunately, down payment assistance (DPA) programs also exist in every state, as well as loans with low and no down payment requirements.

“It’s encouraging so many homeowners understand that 20% down is not the only option, with many lenders offering low-down payment products and down payment assistance programs,” said Kaminski. “As younger generations grapple with historically high home values coupled with larger financial responsibilities and a higher cost of living, it’s important to make every dollar count. Speaking with a mortgage professional early on may not only help save money on a down payment but may also help buyers better prioritize and plan for other financial goals.”

The bottom line for home buyers

Although home buying conditions may be difficult, borrowers maintain a resilient optimism for procuring their next property.

To help yourself in a challenging marketplace, get prepared to move quickly, figure out your down payment amount, and learn how to negotiate your interest rate. Plus, seeing if you qualify for down payment and/or closing cost assistance can help stretch your budget as well.

If you’re ready to start your path to homeownership, reach out to a local mortgage professional.