10 Brutally Honest Reasons You Can’t Afford Your Dream House Anymore

Market forces could be pricing potential homebuyers out of picking up their dream house.
Updated April 11, 2024
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If you’re saving up for a new home as a first-time buyer or moving up to a bigger house with more amenities, you may have found that your dream house continues to be elusive.

The housing market has been brutal in recent years, particularly with the changes in the market due to COVID-19 and inflation. Housing rates have also risen quickly and there’s currently a lack of inventory for new buyers.

Here are some reasons why you may be finding it hard to find ways to boost your bank account and afford that perfect house right now.

Rising mortgage rates

adrian_ilie825/Adobe miniature wooden house and piles of coins

The Federal Reserve, which makes decisions about interest rates, has been raising rates this year in order to slow down rising inflation. But while increasing rates may be good for some parts of the economy, higher rates can affect your ability to afford a home mortgage.

In fact, the average mortgage rate for a 30-year fixed-rate mortgage was 3.45% on January 12 of this year. As of September 12, the rate was 5.89%.

That jump could mean the difference between affording a mortgage and being priced out of the market, especially if you’re trying to stop living paycheck to paycheck.

Home inventory is low

mozhjeralena/Adobe American suburban neighborhood

It may be hard to find your dream house because there aren’t many homes on the market. In fact, just over 680,000 new homes hit the market in July, which is down 15% compared to a year earlier.

However, there also may be some signs of relief. The median number of days a home is on the market was 21 in July, which is up from six days from July 2021. And the total number of homes for sale in the U.S. is more than 1.7 million, up 4.4% in July compared to a year earlier.

Real estate investors are buying homes

wbtky/Adobe hand giving a key

You may not be competing with other potential homeowners when you put an offer in on a house. Real estate investors have been picking up homes to rent out or to list on Airbnb sites to try and earn extra income.

Cost of materials for home builders

tamas/Adobe luxury townhouses with two single car garages

Costs for materials such as lumber or drywall rose dramatically last year as issues rippled through supply chains due to the lingering effects of the COVID-19 pandemic.

Raw-material costs continue to rise for materials like lumber and concrete, pushing the cost of a new home higher. Rising costs could also make home builders skittish about new construction and further decrease inventory.

Rent is high

Paolese/Adobe couple worried about family budget and monthly expenses

Homebuyers aren’t the only ones under pressure due to increasing prices. Rent prices in the U.S. have also gone up, which may make renters reevaluate their current living situation.

Some renters may be willing to make compromises in order to buy a home, putting more potential buyers into an already competitive market.

Pro tip: If you’re not ready to make the jump just yet, there are ways to help pay your rent while you try to save money for a down payment.

Wages haven’t kept up

Shisu_ka/Adobe manager accepting bonus envelope

Wages have increased for American workers in the past year, but that may not be enough to keep up with the rising housing market.

According to the National Association of Realtors, a household with an income between $75,000 and $100,000 could afford 51% of the houses on the market in 2021. 

By contrast, the same income could afford 58% of the homes on the market in 2019. A continued decrease could put fewer homes within reach of potential buyers.

Workers are at home more

ake1150/Adobe woman talking to her colleagues about plan in video conference

As Americans worked from home — and then stayed home — due to COVID-19 workspace restrictions, homebuyers may have wanted to move up in the market. Remote workers wanted extra space for a home office or the freedom to live further away from their offices.

But these new work-life changes could also mean additional pressure on the market. Buyers are facing more competition for that home with an extra bedroom or office space and getting priced out of a new home.

Seniors are staying put

Rawpixel.com/Adobe senior couple lifestyle living

Issues at nursing homes and assisted-living facilities during the pandemic spooked some seniors who decided to stay in their homes rather than move — even if they had to find ways to supplement social security to do so.

In fact, nursing home occupancy rates were around 85% before the pandemic and dropped to 74% at the start of 2022. Fewer seniors moving out of their homes means fewer homes hitting the for-sale market for new buyers.

Zoning issues restrict building

JT Jeeraphun/Adobe large construction site

Local government entities can regulate the types of housing that can be built in a certain area as well as how much housing might be added to a neighborhood.

These zoning restrictions could be limiting the number of homes that are allowed to be built in an area, putting more pressure on the existing home market, and causing prices to rise due to restricting competition.

Changing demographics are altering the market

Rido/Adobe woman hugging man and holding home keys

More millennials are getting into the housing market, which may be putting pressure on the cost of starter homes or more affordable housing.

In fact, as of March 2022, 43% of homebuyers are millennials, up from 37% the previous year. That makes that generation a growing group of buyers in the housing market.

Bottom line

Elenathewise/Adobe modern town houses

While it may be hard to buy a home in the current market, there could still be opportunities for homebuyers. Sit down with your budget to see if there are additional ways for you to save money for a down payment.

You also may want to consider shopping for the best mortgage to see if there’s one that fits your budget.

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Author Details

Jenny Cohen Jenny Cohen is a freelance writer who has covered a bit of everything, from finance to sports to her favorite TV shows. Her work has been featured in The Wall Street Journal, USA Today, and FoxSports.com.

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