By Chris Markowski
For homebuyers, the current state of the housing market is nothing short of a waking nightmare. Home prices have soared an eye-watering 47% since 2020, while rents have climbed a whopping 32%.
To put that into perspective, half of all renters (that’s 22 million households) are now shelling out over 30% of their income just to keep a roof over their heads. And a staggering 12 million of those households are paying more than half their income on rent.
But it’s not just renters feeling the squeeze. Around 20 million homeowners are also considered “cost-burdened” by their monthly mortgage payments. And let’s not forget about those pesky insurance premiums that have skyrocketed by a cool 21%.
The FOMO Trap
In this madhouse of a market, it’s all too easy to fall into the FOMO (Fear of Missing Out) trap. You see those bidding wars where buyers are tripping over themselves to overpay for properties, and you can’t help but feel like you’re missing out on the “opportunity” of a lifetime.
But here’s a reality check: buying a home shouldn’t be about chasing some mythical investment potential. Sure, home prices might go up sometimes, but they can also come crashing down like a house of cards in a tornado. Treating your primary residence as an investment vehicle is a surefire way to end up house-poor and miserable.
Instead of getting caught up in the hype, it’s time to shift your mindset. Think of your home as an installment plan purchase, not a get-rich-quick scheme. You’re buying a place to live, not a ticket to early retirement.
When it comes to upgrades and renovations, do them for your own enjoyment, not because you think they’ll magically boost your home’s resale value. Chasing that elusive “return on investment” is a vicious game that can easily leave you broke and bitter.
The Waiting Game
If you’re a young family struggling with sky-high rent costs, the best advice is simple: wait it out. Don’t let overzealous real estate agents or your own FOMO push you into buying something you can’t afford.
Remember, your monthly mortgage payment isn’t going to change just because home prices drop after you buy. And while your insurance premiums might creep up, that’s about the extent of the damage.
So, stick it out in a rental if you have to. Sure, it might not be your dream home, but at least you won’t be drowning in debt and stress. The market will eventually balance out, and when it does, you’ll be in a much better position to snag something truly affordable.
It’s worth noting that we’re currently facing a severe inventory crunch. As of now, there’s only a 3.7-month supply of homes on the market, while a balanced market typically requires a six-month supply.In other words, we’re not quite there yet. But that doesn’t mean you should panic and make a rash decision you’ll regret later.
At the end of the day, your home should be a place where you create cherished memories, not a source of endless financial stress. It doesn’t matter if you’re living in a modest apartment or a sprawling mansion – what matters is that you can afford it without sacrificing your quality of life.
So, don’t get caught up in the hype and the FOMO. Wait for the right opportunity, and don’t let anyone pressure you into biting off more than you can chew. Your future self will thank you for it.
In the midst of this housing madness, it’s easy to get caught up in the FOMO frenzy and make decisions you’ll later regret. But remember, your home should be a sanctuary, not a source of endless stress and financial strain.So, resist the urge to overpay or overextend yourself. Wait for the right opportunity, and don’t let anyone pressure you into a deal that doesn’t align with your long-term goals and financial well-being.
Because at the end of the day, it’s not about chasing some mythical investment potential or keeping up with the Joneses. It’s about creating a home where you can live comfortably and build cherished memories with the ones you love.
And that’s something no amount of money can buy.
Chris Markowski is the founder and partner at Markowski Investments and host of the Watchdog on Wall Street radio show and podcast.
