Today, I’m diving into a topic that hits home for many—homebuyer regrets. A recent study found that a staggering 90% of millennial homeowners have regrets about their first home purchase. But wait, it gets even more surprising—93% of all buyers in 2023 expressed regrets about their home purchases. With the current state of the housing market, these regrets are likely to persist. So, let’s explore why this is happening, what you can do to avoid these pitfalls, and the most common mistakes buyers make.
Housing Market – The Story So Far
First, let’s look at what’s happening in the housing market:
We’re operating with about a third of the inventory we had back in 2016, creating a tough market for both buyers and sellers. Sellers are reluctant to move and give up their favorable mortgage rates, leading to even lower inventory levels. Meanwhile, the average buyer now needs an income of $115,000 per year to afford a typical home. It’s a tricky scenario where prices won’t drop until interest rates incentivize homeowners to sell, but lower rates would also increase demand, pushing prices higher.
Current Sentiment and Economic Outlook
75% believe the economy is on the wrong track, the highest level since 2021.
81% of workers feel their wages haven’t kept up with the cost of living.
A survey shows that 39% expect to pay a higher interest rate than they’d like, 36% are prepared to make multiple offers, 30% plan to max out their budget, and 29% are ready to pay more than a home’s asking price.
Common Homebuyer Regrets and How to Avoid Them
Regret #1 – Too Much Maintenance
The top regret among homeowners, according to 33% of respondents, is the amount of maintenance required. Maintenance costs are skyrocketing—Zillow estimates homeowners pay $14,155 per year, or about $1,180 a month, in hidden costs. Average home maintenance costs have increased by $400 annually, now at $6,548 per year. Inflation, supply shortages, and labor costs are all driving up prices.
To avoid this, get a thorough inspection report when buying a home. Expect maintenance to cost around $500-$600 per month or 1% of the home’s value each year. These costs will chip away at your savings over time, so be prepared.
Regret #2 – Buying Too Quickly
About 30% of respondents regretted buying too quickly, often due to impatience. Millennials especially struggle with this, with 27% owning homes in bad locations and 26% having bad neighbors.
Homeownership is a big commitment, and rushing into it can lead to bad decisions. Spend time getting to know the area before buying. Visit the home, meet the neighbors, and learn about local issues before committing.
Regret #3 – Paying Too Much Money
38% of homebuyers said they paid over the asking price in 2023, and 22% regret their mortgage is too expensive. To get the best interest rate, shop around and get multiple quotes. This strategy can save you an average of $84,000 over the life of the loan.
Set a strict budget before house hunting and stick to it. Don’t get caught up in the moment and overpay.
Regret #4 – Buying a Fixer-Upper
26% of buyers regretted purchasing a fixer-upper. These properties are tempting due to lower initial costs but often end up costing more than expected. Assume your project will cost at least 25% more and take twice as long as planned.
Buying a fixer-upper can be a great way to get a property under market value and customize it, but go in with the right expectations and stick to your budget.
Is Homeownership Worth It?
Homeownership is a significant investment and should not be rushed. While it can be a good investment, it requires careful planning and realistic expectations. Unless you plan to live in the home for at least 10-15 years, renting might be cheaper in most areas.
Tips to Avoid Homebuyer Regrets
Plan for Long-Term Ownership: Buy with the expectation of living there for at least 8-10 years.
Understand Your Motivation: Be clear about why you’re buying a home and ensure it aligns with your goals.
Stay Within Your Budget: Don’t max out what you can afford to ensure you have a financial cushion.
As a first-time homebuyer, you’ll need to make sacrifices. You won’t get the perfect home right away, and that’s okay. Use your first home as a stepping stone to learn about homeownership and gradually trade up to your dream home over time.
That’s all for today, folks. If you found this guide helpful, don’t hesitate to reach out for more personalized advice or if you’re ready to take the next step in your home buying journey. Happy house hunting!