Don’t want to miss out again! 92% of the U.S. newcomers: grit your teeth and buy a house this year!

A recent survey found that 92 percent of millennials who plan to buy a home this year say U.S. inflation has affected their home-buying goals, but are saving money to do so this year.

According to the survey by Real Estate Witch, a platform owned by real estate data firm Clever, the majority of U.S. millennials are not letting inflation be a barrier to buying a home.

While 28 percent of these millennials have put off plans to buy a home, the rest say they are responding to inflation by saving more money for a home (59 percent), spending more than expected (36 percent), and buying a smaller home (25 percent).

Millennials, typically defined as Americans between the ages of approximately 27 and 42, are in their prime home buying years. According to the National Association of Realtors, the typical first-time homebuyer will be 36 years old in 2022, up from 33 years old in 2021.

First-time homebuyers account for 26 percent of home purchases in 2022, up from 34 percent in 2021. double-digit year-over-year home price increases in the first half of 2022, combined with rising mortgage rates, have placed a burden and pressure on many homebuyers.

Home prices continue to fall from their highs

However, the situation is gradually improving as home prices continue to decline. According to the Association of Realtors, the median price of an existing home in December 2022 was $366,900, just 2.3 percent higher than a year ago and down from $370,700 in November. in June 2022, the median price was $416,000, 13.4 percent higher than in June 2021.

In addition, mortgage rates are now declining. As of Jan. 24 of this year, the average rate on a 30-year fixed-rate loan was 6.21 percent, compared with 7.32 percent at the end of October last year, Mortgage News Daily reported. As buyers know, the higher the rate, the more they pay each month.

5% or 6% could be the “new normal” for mortgage rates

While it’s impossible to predict how rates will change over time, experts say buyers shouldn’t wait for mortgage rates to drop to below 3% or slightly above in 2020 and 2021, as it’s unlikely we’ll see these historically low rates again anytime soon.

Because the Fed took emergency action to shore up the economy after the Covid pandemic hit the U.S. in 2020, it led to such low mortgage rates at that time.

“That was an unusual situation,” said Lawrence Yun, chief economist for the National Association of Realtors.

“Buyers should have the mindset that the new normal rate should be 5 or 6 percent ,” she said.

Homes still selling fast

One downside buyers may face is the limited availability of listings on the market.

As of last month, the number of homes on the market in inventory was only available for sale for 2.9 months. That’s down from 3.3 months last November, but up from 1.7 months in December 2021. According to Redfin, a balanced market requires a four- to five-month supply of listings in inventory.

“There’s not that much inventory on the market,” Lawrence Yun said.

“Even with the slowdown in the real estate market, days on market is still less than a month,” he said. “That means buyers in the market are looking for the listings they want and snapping them up quickly.”

Homes that stay on the market longer could be a buying opportunity

If you’re hoping to find sellers who are more likely to lower their prices, one strategy is to look for homes that have been on the market longer.

“Newly listed homes usually face a lot of competition from buyers,” he says. “If you find a home that has been on the market for at least a month or two, that would be a good opportunity …… Sometimes sellers will go 10 to 15 percent below the asking price.”

Also, he said, “there will always be more affordable homes a little further out of town,” he said. “And those homes tend to stay on the market longer.”

Adjustable-rate mortgages may be an option

If you’re looking to cut costs, then an adjustable-rate mortgage (ARM) may also be an option worth considering, Lawrence Yun says.

The appeal of an ARM is its lower initial interest rate compared to a traditional fixed-rate mortgage. The rate is fixed for a period of time – say seven years – and then it adjusts upward, downward or stays the same, depending on the level of interest rates at the time.

“Usually the first home is not owned for very long, usually five, seven or 10 years,” Lawrence Yun said. “So with that in mind, an ARM may make more sense because it usually offers a lower initial rate and by the time it’s ready to adjust, that’s when you would typically sell the house.”

While there are limits to how much interest rates can change, experts recommend making sure you can afford it if you encounter the highest rates in the future.