Affordability

Time to deal with this word… Yes! It is a real thing! But I firmly believe it is, like most things in the atmosphere, being manipulated to serve a purposes. It exists in everything we do, but it is subjective to the situation and person. So let’s dig in to how it affects home ownership specifically. And look at 3 ways that you can make real estate more affordable. BTW, this is sort of a soap box issue for me so prepare yourself!

Affordability is simply the ability to afford something. When the entire world went on lockdown during the COVID crisis commerce and businesses suffered. Once the lockdowns were lifted and business went back to usual, companies were missing in some instances 2 years of profits. Many businesses decided to just shut down, but some, whole industries even, chose to try to make up those missing gains by hiking prices. It’s this giant cauldron of price hikes, demand for higher wages, free printed money, and people slowly re-entering the world. Heck, there are some people who still don’t enter the world! Consider for a minute all the people who still, 5 years later, work completely or even partially from home. I remember when my mom worked in Uptown Charlotte and on holiday breaks I would go to work with her. The amount of people in the sky bridge just ordering food or coffee or shopping was scary to a little kid like me. Now, there are times when Uptown still looks like a ghost town. Just the amount of traffic on a Tuesday compared to a Friday still tells the tale of businesses like lunch spots, coffee shops, gas stations, and retail stores, that just don’t have the traffic and therefore sales that they used to. So, to compensate, prices went up to make up for lost time, lost profit, or lost people.

But the housing market was something entirely different. That inflation, in my humble opinion, was ruled entirely by greed. There were way more buyers in the market than sellers. People were looking to move when work-from-home became the norm. With ridiculously low interest rates, it created buyers that weren’t even thinking of buying. Because of the competition people were offering way more money than the houses were worth, creating a giant jump in property values in Charlotte around 25% in 18 months, instead of the usual 4-6% increase we see on a normal yearly basis.

With all of the increase in prices, the increase in wages has not kept up. So if your housing went up 20% and your groceries are up 11%, but your boss only gave you an average cost of living raise of 4% at your last review and that has happened for the last 3 or 4 years (and many people have seen no raise due to those slow COVID years) then the items and the activities that you used to afford are not possible anymore.

But that doesn’t mean that NOTHING is affordable! (This is where I may ruffle some feathers.) I’ll start with groceries. Are prices through the roof? Yes! Then change the way you eat or shop. Shop at a discount store. Spend money on the things that are most important. Create a budget and shopping list and stick to it. Create a meal calendar so you know how much you need of each ingredient so you don’t end up throwing a portion away when it goes bad after you failed to use it. Reduce the amount of things that you throw away that have gone bad before you eat them. Is it more difficult to live this way? Maybe. Is is more time consuming? Maybe. What better do you have to do? Watch some show on one of the 5 streaming stations you also pay for?

Now let’s talk about real estate. The same principle applies here. You may not be able to afford what you used to be able to afford, but you can afford something. Here are a few tips that I share with clients whose budget isn’t where they would like it to be.

1. Locations. Our area is pretty accessable to get pretty much anywhere in under an hour. You don’t have to buy a house in the popular neighborhood, because by the time you are ready to sale, the popularity may have shifted.
2. Size Matters. I have long been over McMansions. No one needs 7 bedrooms. I struggle to understand how 2 people live in 4000 square feet. Consider space that does not feel confining, but also doesn’t create rooms no one ever spends time in. There is a giant trend toward cute little bungalows and tiny homes that I absolutely love! When making a shopping list for a home consider what rooms you need (bedroom, office, etc) and start there.
3. Be flexible. The biggest problem I have seen recently is sales on homes not closing because people are refusing to negotiate. Be willing to understand that you are buying a home, probably used, and not a museum. Things are going to need fixing or adjusting or redoing. You may be able to get the seller to do them, if you offer a price that wasn’t too insulting, but you also may have to do it yourself after you get that great deal. If you want perfect, buy a new home (those are on sale too).
4. Look for a deal. Yup! They are out there right now! Sellers are not listening to their agents and getting super disappointed when their home sits on the market for month after month with little to no activity. Everyone says the only way to sell is to lower your price. I think a seller can be patient or lower their price. But for a buyer, I have put in offers at $100,000 UNDER list price. So make a deal!
5. Start with a budget. Figure out how much you can afford first. Housing should be less than 50% of your income. Some financial advisors will even say closer to 30%. So what do you make a month and what can you afford to pay in mortgage. I can PROMISE you that mortgage payment is more beneficial than any rent payment even if it is cheaper or smaller or in a different location.

I grew up in a family that didn’t have much. I have been through phases of my life where I was jobless or didn’t bring very much money in. I consider myself a professional at living on less. And I will say the biggest problem I see from people who don’t think they can afford a home is waste. Whether it is a waste of space or food waste or too many clothes in your closet or things on the shelf, figuring out how to live a life with just what you need is the best way to make life so much more affordable.