Six Figure Buyers and The Current Real Estate Market

Today's real estate market - brutal, awesome, or somewhere in between? Well, it truly depends on what side of the aisle you sit on (seller or buyer), but having been on both sides of the conversation, nobody can argue that the amount of dollars needed to purchase a home have increased significantly.  In today's current real estate market, it often takes six figures (either on your own, or collectively with your spouse or life partner) to make the purchase happen. Why? The answer is multifactorial, but here are a few big ones.

1. Inventory is low

Like, really low. Is it as low as the COVID years? No, but by historical standards, it is still super low. With low inventory and consistent/high demand, the prices of homes have only increased. In turn, six figure salaries are needed to qualify buyers for the homes.

2. Let's talk about rates

Rates are extremely high compared to 12-18 months ago. Many (to include myself initially) thought this would crush real estate home prices. However, it seems to have created a paradoxical effect of making home owners realize just how important their asset is. Meaning, why would a homeowner trade their 3% mortgage for 7% in this current market? Unless they are forced to sell for a life issue (death, divorce, etc), many are going to stay put. They realize their 3% rate is gold, and they aren't going to give that up for anything! In turn, not as many houses are coming on the market, which only exacerbates the inventory issue mentioned above.

3. Inflation strikes again!

Actually, it's been striking for several months, but if one was to realize what a home really is....a collection of wood, drywall, petroleum products, copper.....aka, a bunch of commodities! And what has happened to commodities over the past several months?! Their price has skyrocketed due to inflation, and so has the one thing comprised of all these products - houses.

Moreover, what is the act that gels them all together? Labor. And what has inflation done to the cost of labor? Yup, you guessed it. It's skyrocketd as well. What does this all lead to? For first time home buyers, it's going to remain challenging. Home prices are not likely to come crashing down anytime soon.

Therefore, many individuals will need to make at, or near, six figures to be able to afford a home. Or, at the very least, you will need a second job or source of income, to be able to afford a home in today's market. Of note, there are other options, such as buying land and building your dream home. Land can be cheap, and/or you may find more flexibility with land sales, where the seller might finance the land to you  - helping you bypass the banking system altogether, since the seller "acts as the bank".

Then, you can focus on finding the right builder, and build the exact home you want (or at least, a home you can afford), which might not require six figures at all. But it will take more time. And, in this environment, it seems as if time is all buyer's have....