Although the housing market has recovered to the point where it has now surpassed pre-crash levels, the rate of building has slowed down markedly. In 2016, the supply of homes fell 330,000 units short of demand. In May 2017, a report from the National Association of Homebuilders showed that home prices are an incredible 50 percent higher than what it deems the ‘normal’ level.
The National Association of Realtors said that the median price for a new home was $252,800 in May 2017, an increase of almost 6% on 2016. As a result of rising prices, an increasing number of Americans are experiencing ‘buyer’s remorse.’ The main issue is that the homes they purchased are too small; primarily due to the cost of property.
The Biggest Points of Contention
Here is a list of regrets from homeowners as per the Trulia Survey:
- General Regrets About Current Home or Process of Choosing Home: 51%
- Wish They Had Bought Instead of Rented: 41%
- Wish They Had Chosen a Larger Home: 33%
- Wish They Had Performed More/Less Remodeling: 26%
- Wish They Had Better Information Before Purchasing: 9%
The level of regret is much greater amongst 18-34 years; 71% say they had regrets about their home or the purchasing process. It is also worth noting that over 40% of renters wished they had bought their home instead. According to David Weidner of Trulia, it is cheaper to purchase rather than rent over a seven year period in every major U.S. market. He also pointed out that home size is a common gripe as property gets more expensive and people have to settle for less in terms of space.
How to Handle Buyer’s Remorse
According to Trulia, up to 20 percent of Americans believe a housing mistake made in the past is preventing them from changing their existing situation. We wish there were a ‘one size fits all’ solution to the problem, but in reality, your unique circumstance dictates your next steps.
For instance, if you purchased your home recently, it is worth holding onto it for the next few years before considering a sale. As well as giving your property a chance to appreciate in value, it also enables you to handle any debt issues, add to your savings or increase your income. All of these financial steps will help you receive a better mortgage deal in the future.
If you are one of the 51% of Americans who have regrets about their home or the purchasing process, it is important not to dwell on the past. There are so many variables involved in buying a home that it is often tough to pinpoint precisely where you made a mistake. Obviously, there are some obvious errors such as significantly overpaying for a property.
Regardless, it is not worth torturing yourself over a perceived mistake in the past. Look to the future to conjure up ideas to help you out of your existing housing situation. However, prevention is better than cure, so if you haven’t purchased a home yet, follow these steps to avoid buyer’s remorse.
5 Way to Steer Clear of Buyer’s Remorse
Analyze Whether the Home Is What You Need Now & In the Future
It is time for a reality check; is the home large enough to accommodate more people if you start a family or expand your current one? The issue of space practically always crops up after a few years in a property. It appeared large enough at the time of purchase, but once you accumulate more possessions, storage becomes a pain.
Is It Affordable?
Never stretch your budget beyond its natural limit with the assumption that you’ll earn a larger salary in future. It’s all too easy to succumb to emotion and burden yourself with a mortgage beyond your ability to repay. Remain conservative with your first home; if your salary increases, it makes the monthly repayments much easier. There is also the possibility of using equity to purchase a bigger home later on.
Watch Out For Hidden Costs
One common mistake when purchasing property is to fall in love with a home and pull strings to make it fit within your budget. While you may successfully find a mortgage that is affordable on the surface, hidden costs will place you under severe financial strain. We’re not just talking about utility bills; we’re also including property tax, maintenance, and property insurance. Then there is the small matter of legal fees, closing costs and other payments related to buying or keeping a home.
What About the Neighborhood?
First and foremost, you want to live in a safe neighborhood with a low crime rate. Make sure you do your research on this front before signing on the dotted line. How far away from major amenities and entertainment centers is the home?
For parents of young children, a home in an area within a high-quality school district is a must. In the Trulia survey, 13% of parents with kids under the age of 18 wished they had chosen a neighborhood with a better school.
Are You in Good Shape Financially?
As well as affording the down-payment, there are other issues to consider. We recommend that you ensure your credit score is good and try to pay off as much debt as you can before applying for a mortgage. These steps will help you benefit from an improved mortgage rate which could save you a fortune over the next couple of decades.
Although home ownership is always a risk, it is something Americans must continue to strive for. When choosing to purchase a new home, look to avoid common errors such as buying a property that is too small, not getting the right information or applying for a mortgage when in a poor financial situation. By following these steps, you will avoid home buyer’s remorse.