Exciting News for Homebuyers: A Shift in Housing Affordability!

For the first time since 2020, housing affordability improved year over year. This is largely due to a drop in mortgage rates, which have dipped from 7.07% to 6.09% over the past year. While this is undoubtedly great news for home buyers, affordability remains a challenge for many. 

According to recent data, U.S. buyers now need to earn around $115,000 annually to afford the typical home, down 1.4% from last year. Yet, the average U.S. household earns only about $84,000 annually—27% less than what's needed to buy a median-priced home. 

Because of this, many buyers are finding themselves in positions where compromise is a necessity. But that doesn’t mean homeownership is off the table. Navigating these compromises smartly can help ensure you still get a home you love without overspending or sacrificing too much on your wish list.

Let’s dive into the most common compromises homebuyers are making in 2024, and how you can make decisions that work best for you.

The Top Compromises Buyers Are Making

Homes.com and Apartment Therapy recently conducted a survey on “The State of Home Buying,” asking 676 recent and prospective buyers, along with real estate professionals, about the home buying experience. According to the survey, here are the top compromises being made during the home search today:

Condos and Townhomes are Growing in Popularity

With single-family homes becoming less attainable for many, a significant percentage of buyers are shifting their focus to other property types. For those with a budget of less than $500,000, about 17% are now looking at condos and apartments, while 15% are exploring townhomes as an alternative.

These property types often provide more affordable options for buyers in desirable locations or those seeking to stay within budget. While a condo may not offer the spacious yard or privacy of a single-family home, it can provide a low-maintenance lifestyle with access to shared amenities like gyms and pools. Of course, when looking at a condo or townhome, you’ll need to factor in any HOA fees to your monthly payment.

Location, Location…Compromise?

It’s no surprise that location is a top priority for homebuyers. But as prices rise in sought-after neighborhoods, many are adjusting their searches. Recent buyers report that they were willing to widen their search area to find homes that fit their budget. In fact, 21% of buyers purchased outside their ideal neighborhood, and a third of current buyers are considering doing the same.

Being open to different areas can make all the difference in a competitive market. Expanding your search radius just a few miles can open up more affordable options that still meet your needs.

How to Make Smart Compromises Without Regret

Knowing where to compromise — and where to stand firm — is key to navigating today’s housing market. Here are some tips to help you make informed decisions:

1. Prioritize What You Can’t Change

While it may be tempting to focus on cosmetic features like flooring or paint color, those are often the easiest and most affordable changes you can make after purchasing a home. Instead, focus on the non-negotiables that are difficult to alter, such as the home’s layout, structural integrity, and location.

2. Keep Your Future Needs in Mind

As you search for a home, think about your current lifestyle and your future needs. Will this property suit your needs for the next five to ten years? Buying a condo now may seem like a great way to stay within budget, but if you’re planning to expand your family or want more space in the near future, it could lead to another home search sooner than anticipated.

3. Stick to Your Budget

While it may be tempting to stretch your budget to get a home you love, overextending yourself financially could lead to significant stress down the road. 

Determine your monthly housing budget—and when looking at properties, be sure to factor in everything from your mortgage interest and principal, property taxes, homeowners insurance and HOA fees. Sticking to your budget ensures that you’re prepared not only for these payments but also for unexpected expenses that may arise after you move in.

Compromise Doesn’t Have to Mean Settling

By focusing on what truly matters — like location, structural integrity, and your long-term goals — and remaining flexible on other aspects, you’ll be well-positioned to make a smart purchase. And remember, working with an experienced real estate agent can provide valuable insights and guidance throughout the process, helping you make decisions with confidence.

In the end, buying a home is about finding the right balance between compromise and fulfillment — and with careful planning, your next home could be just that.