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The Homebuyer Conundrum

One of the things retirees have on their list to to-do's is where to retire and in what type of home.

In the past, many retirees have planned to sell their home and downsize to a smaller and less expensive lifestyle. Once the kids have grown and they're starting a new chapter of their lives, it makes sense to do that

However, the rapid increase in the price of homes in the last year has flipped that strategy on its head. Retirees can’t downsize with ease anymore. The U.S. economy is under pressure and has undergone dramatic change in the last year.

The pandemic caused havoc with livelihoods and businesses, and the effect on prices across the board has been severe. Supply issues are affecting stock items and the price of groceries. Common household shopping items are shooting up, leading to an increased cost of living. As if that wasn’t enough to deal with, houses have been selling at unprecedented prices.

According to CNBC, over the past ten years housing prices have risen 30 percent. Compare that to income only increasing by 11 percent and we see the issue starting to emerge. Fannie Mae's Home Purchase Sentiment Index went down in January of 2022. The poll showed that potential homeowners are anxious and insecure about buying in the current market.

Daniel Lerner, Executive Vice President of David Lerner Associates said, “Deciding on buying a home is a long-term commitment and you should be sure of what you are getting yourself into. Make certain you get the best advice on your mortgage, because you don’t want to find out you could have had a better rate or terms elsewhere when it is too late. Be sensible in your investments.”

Although the housing market has cooled somewhat, experts don't expect home prices to come down much. What they are predicting is fewer people buying homes.

This means that downsizing by selling your current home and buying something smaller and living mortgage-free is now unattainable for many. In January, a survey found that a record-low one-quarter of respondents reported that it’s a good time to buy a home. 75 percent believe it isn’t a good time to buy at all. However, with the rise in prices, it means there are many out there thinking about cashing in. 69 percent of consumers think that it’s a good time to sell. Overall, four of the index’s six components decreased month over month.

On top of the prices, mortgage rates are uncertain. The research found that the number of people who expect mortgage rates to go up increased by 2 percent up to 58 percent. Overall, more Americans think mortgage rates won’t go down over the next 12 months but rather increase or stay the same.

No matter what you decide, make sure your financial situation is sound and your decision is not a rash one.


Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide mortgage, tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.

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