Five reasons it's hard to buy a house right now

Photo (c) maribom - Fotolia

A combination of factors is keeping many would-be buyers on the sidelines

The home ownership rate has fallen to a 50-year low, at a time when interest rates are extremely low and unemployment has fallen to 4.3%.

What's wrong with this picture?

The real estate industry has been asking that question for months, and has now come up with five answers, and lack of interest is not one of them. Most people still want to buy homes, Realtors say, it's just really hard right now.

A study commissioned by the National Association of Realtors (NAR) has identified five conditions that have combined to reduce home sales at a time when they should be booming.

Post-foreclosure stress disorder

The first is something researchers call post-foreclosure stress disorder. They point to psychological changes in financial decision-making that affect millions of consumers who went through a foreclosure after 2008, or the people who lost their jobs after the financial crisis.

This is one group of consumers that does not really want to buy a home. Once burned by a failed economy, they are now extremely cautious about making any financial investment.

Student loan debt

Then there are student loans, which just happen to be burdening the generation that is just now forming households. These people have typically purchased entry level homes, propelling the housing market.

But with student loan debt totals now hovering around $1.3 trillion, they essentially already have a mortgage -- the one they are still paying for their education.

If you are making payments on a $40,000 student loan and paying ever-increasing rent, it makes it very difficult to save money for a down payment. This group might like to buy a home but is finding it difficult.

Mortgage availability

After the crash of the housing market, it was hard to get a mortgage. We went from anyone being able to qualify for a mortgage to very few being able to.

That condition didn't last, however, as mortgage companies put new, more stringent lending policies into effect. But you still need a down payment, a decent credit score, and at least two years of uninterrupted employment history.

Even so, it's still a lot harder to get a mortgage than it used to be. The NAR study finds consumers with good-to-excellent credit are not getting approved at the rate they were in 2003.

Fewer homes to choose from

The fourth reason is especially frustrating. Even if you have a steady job, save for a down payment, and can qualify for a mortgage, it's harder now to find a home to buy because there are fewer to choose from.

Inventory levels have fallen for two years. Fewer homeowners are selling their homes and contractors are building fewer new homes. New home construction is at about half the rate it was before the housing crash. Costs have risen so much that the new homes that are being built cost more.

Affordability issues

The shortage of houses has contributed to the final reason its hard to buy a home. Even though home sales have fallen in recent months, home prices have risen, because of supply issues. Now, homes in some markets are simply out of the price range of the median home buyer.

Until this changes, the study authors project that home affordability will drop by 9% in the top 75 housing markets over the next two years.

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