Young Americans are struggling to get into the housing market
For younger Americans, it seems nearly impossible to break into the housing market. The high costs coupled with rising interest rates are making it extremely difficult for them.
House Hacking: The New Trend
In order to resolve issues of affordability, many are turning to a new housing trend known as “house hacking.” The practice involves renting out part of one’s own home, or at times even an entire property, to earn extra income. A recent report by the housing market site Zillow revealed that 39% of recent homebuyers believe house hacking to be a “very” or “extremely” important opportunity, marking an increase of eight percentage points over the past two years. Furthermore, the trend is especially popular among the younger generations, with 55% of millennial and 51% of Gen Z homebuyers expressing a positive view towards house hacking.
Affordability Constraints Mount
The concerns regarding homeownership more frequently turn into a reality through the additional income earned from the practice. Manny Garcia, senior population scientist at Zillow, states that the additional income from house hacking is important for making homeownership dreams a reality in the current constraints of the housing market.
A median house in the U.S. sold for $413,874 in October, marking a 3.5% increase from the previous year, according to a report from real estate site Redfin. Additionally, the average rate for 30-year mortgages hit 8%, the highest level seen in 23 years.
The Need for Alternate Options
Amid concerns about the high price of homeownership, Redfin’s chief economist Daryl Fairweather suggests that young people need more options. With the limited availability of small starter homes, homebuyers may need to look into owning a more expensive house than intended.
Rental Market Inflation
The trend of house hacking is currently thriving due to the lack of small homes available for purchase. However, the lifetime of the trend could be short-lived. New apartment buildings are under construction, which will provide available units in the near future, especially smaller one-bedroom apartments.
Considerations For Prospective House Hackers
Potential buyers need to consider various factors before jumping onto the house hacking trend. Considerations included building up a sufficient down payment, proof of income, and understanding that potential rental income may not be taken into consideration by banks. Furthermore, it is crucial to consult with rental managers and check local ordinances and homeowners’ association regulations before renting out a property.
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