Housing market: Most new homeowners are ‘house rich, cash poor’

A majority of new American homeowners say they’re “house rich and cash poor,” according to a new U.S. News & World Report survey.

The survey, conducted by the third-party survey platform Pollfish, asked 2,000 new homeowners in the U.S., who purchased their first home between 2021 and 2022, how they currently feel about their financial situation.

More than half of them — 59% — answered that “house rich and cash poor describes my situation.” It’s a sentiment that “reflects both the rising sales prices of homes across the country as well as some of the unexpected costs of homeownership that first-time homebuyers encounter,” according to the U.S. News and World report.

Why it matters: Buying a home can help families and individuals find more stability and wealth long term. But it can also be a stressful and challenging milestone, especially if the purchase was made within the last two years as home prices surged amid the pandemic housing frenzy.

Even though home sales have slowed dramatically over the past several months amid higher interest rates, the U.S.’s median existing home sale price was up 10.8% year over year in July, at $403,800, according to the National Association of Realtors’ latest monthly report.

Between December 2020 and May 2022, the national median home sales price jumped nearly 34%, according to Census Bureau and Housing and Urban Development data.

As the Federal Reserve continues to wage its war on inflation and mortgage rates continue to hover over 5%, the cost of buying a home has risen even higher. It has priced out many Americans from being able to afford it, hence why home sales were so sluggish in July and inventory has skyrocketed.

In Utah, higher mortgage rates to the tune of 5% to 6% have priced out a staggering 70% to 75% of Utahns, according to calculations of Dejan Eskic, a senior research fellow at the University of Utah’s Kem C. Gardner Policy Institute and one of Utah’s leading housing experts.

Those higher rates have jacked monthly mortgage payments from $1,400 a month earlier this year, when interest rates were lower, to now $2,600. That has pushed homebuyers to stretch their budgets thin to buy, while also caught between rising rental rates.

Why buy when prices are so high? When U.S. News & World’s poll asked why new homeowners purchased their first homes in either 2021 or 2022, nearly half — 48% — said the timing was right financially for their household.

Another large chunk — 40% — said they bought when they did because “home prices were increasing and I/we felt it was wise to buy sooner rather than later.”

That concern has merit, even today as the U.S. market slows. Yes, a rising number of sellers are beginning to cut their listing prices as they recalibrate to slowing demand, but home prices have only now begun to plateau or drop slightly, particularly in metros in the West where prices went especially haywire.

Housing experts largely don’t predict a dramatic decline in home prices even as sales slow, pointing to a nationwide housing shortage. Demand for housing is real, it’s only tempered recently because so many would-be buyers have been priced out.

Are most Americans happy about their purchases?

  • The largest chunk of the poll’s respondents — 48% — said they think they bought at the right time.
  • More than a third — 35%— said they felt they should have bought a house earlier.

Of those that said they wished they’d waited longer, more than half — 51% — said they wished they’d waited so they could have saved more money. About 47% said they wished they’d waited “until home prices went down.”

Unexpected costs to buying a home: A majority of survey participants told U.S. News & World — 56% — they had encountered unexpected home repairs since moving into a new house, and the total cost of the repairs varied for respondents.

  • For most buyers who took the survey (56%), those repair costs represented somewhere between $500 and $1,000 in unexpected expenses.
  • More than a third (33%) said they spent more than $1,000 to fix the unforeseen problem.
  • About 11% said they spent less than $500 on repairs.


https://www.deseret.com/utah/2022/8/26/23323488/housing-market-home-prices-house-rich-cash-poor-bubble-recession-crash