Majority of Americans Regret Buying A Home; More Than Half In Worse Financial Shape

A recent study reveals that 93% of home buyers regret their purchase. From compromising on features or location to overpaying for a property, the current housing market has left many buyers unhappy and in worse financial shape.

Home ownership has always been part of the American Dream. But today it is out of reach for many, and those who stretch to reach it have found it is not all it's cracked up to be.

The State Of The Market: The Home Buyer's Perspective

A study by Clever Real Estate surveyed recent home buyers about the state of the housing market. Most Americans believe it is not a good time to buy (53%) or sell (51%) a home, and 58% of recent home buyers report overpaying.

Additional findings include:

  • 93% of recent home buyers say that the real estate market had an impact on their experience
  • 56% of recent home buyers felt like they were in over their heads financially since finalizing their home purchase
  • 93% of home buyers have regrets about their purchase

Why Are Housing Prices Inflated?

Scarcity in the housing market has steadily inflated prices. The lack of homes for sale in the United States means that 2023 saw more than 75% of home buyers shelling out an average of $516,500 for homes nationwide, a 31% increase from 2022's average home price of $500,156. On average, home buyers paid 23% above the national average.

Most American home buyers who made a recent purchase (58%) and 63% of first-time homebuyers say they overpaid. Numerous factors are behind this. First is inflation, which increases the price of materials for home builders to construct a new home. They pass these higher costs to the buyer as a higher purchase price.

As the Federal Reserve increases interest rates to fight inflation, it increases mortgage rates. In 2021, mortgage rates stood at less than 3%. Today, they are hovering around 7%. For a $240,000 home, this increases the monthly payment by nearly $600. Homeowners with a lower rate don't want to sell and buy a new home with a much higher interest rate.

Finally, while home sellers can enjoy significant gains when selling, they realize they will be overpaying for a new home, causing them to stay put. 

Buyers Are Still Willing to Pay

Soaring housing prices are also affecting the buying process. Traditionally, a 20% down payment was standard when purchasing a home. However, the high prices have created a situation where most buyers cannot afford that much or even close to it. In 2023, around 55% of buyers put down less than the standard 20% when buying their home.

On the other hand, scarcity has created competition in the housing market, driving buyers to pay over the asking price for the home they want. In 2023, 38% of home buyers paid over the asking price, up from 31% in 2022. These numbers likely force buyers to go against the advice of financial expert Dave Ramsey, who, in his baby steps, recommends a mortgage payment of not more than 25% of monthly take-home pay.

First-Time Home Buyers Struggling Most

With the increase in home prices, more people, including repeat buyers, are looking at the lower price tier, a segment traditionally reserved for first-time home buyers.

This additional competition squeezes out first-time buyers as all home buyers want a better deal. Because repeat buyers have a proven track record and often have assets in the form of home equity, they can easily overtake first-time buyers and get better terms and lower interest rates.

One option for first-time home buyers is to look at properties that need rehabbing. In this scenario, a home buyer rehabs a property while living there and then rents it to earn income. Once there is a rental history, they refinance for better terms and cash out some equity, allowing them to purchase another home. The process is often called the BRRRR method and is a unique way to become a homeowner. 

The Majority of Americans Struggle To Pay Mortgages

There was a time when the American dream included owning a home, but that dream has become a nightmare for many. Buying a home was more stressful than 66% of first-time and 59% of recent buyers thought it would be. The sad thing is that the stress of buying the home did not pay off once the purchase process ended. The stress continued long after the ink on the paperwork had dried.

In fact, 52% of home buyers say that they have not gotten any happier since they purchased their home, and 20% say that they are less happy than they were before becoming homeowners.

The reason for this decrease in happiness? Unexpected costs. Twenty-six percent of new home buyers were surprised with costs they had not anticipated, and 56% feel like their home purchase has put them in a financial situation that is more than they can manage. For 1 in 4 home buyers, their overall financial status has declined, sometimes significantly, since they became homeowners.

However, the struggle to pay their mortgage on time each month is pulling homebuyers under. With 62% of homeowners reporting having difficulty making their monthly mortgage payments on time, it underscores the crisis in this current economic climate.

As homebuyers work harder and harder to juggle maintaining their lifestyle and paying their mortgage, their personal debt increases. A staggering 56% of recent home buyers have assumed additional debt, such as personal loans and credit cards, since they purchased their home. Many buyers even believe that their debt situation (29%) and overall financial situation (27%) have worsened. That's led to a deterioration in their overall happiness (20%) and negatively impacted their relationships (19%).

Managing A Mortgage is Doable But Not Always Easy

Homeowners who pay off their mortgage early reap certain benefits, like paying less interest and easing that financial burden faster. Being mortgage-free early is ideal, but it is only sometimes practical or even possible. Those still in the planning phases of taking the step into home ownership may want to pause before leaping in. Numbers don't lie, and where once home ownership was the pinnacle of success in this country, it is now moving quickly into something that sucks the life out of the individuals who fall for it – or at least go into it unprepared.

Preparation is essential, but it may be time for Americans to ditch the traditional ideas of the American dream and create a new one.

This article was produced by Media Decision and syndicated by Wealth of Geeks.