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It seems like we’ve been in the ultimate seller’s market for real estate over the last two years. Even with interest rates on the rise and mortgage rates at their highest point since 2009, potential homebuyers are still at a disadvantage thanks to constrained supply.

Between inflated costs and those increasing rates on home loans, buying a house is more expensive than ever. Is there anything you can do if you want to buy, but simply can’t afford it right now?

As a financial planner, here’s what I’d suggest keeping in mind if you find yourself in this situation.

1. Buying isn’t always better than renting

The first thing I’d remind you of is that, despite the oft-repeated phrase, it’s actually not always better to buy than to rent. And renting isn’t throwing money away, either!

There are plenty of situations in which renting is the optimal choice financially, beyond the pop-up costs of homeownership, and that’s regardless of whether or not you can afford to buy.

Personally, I waited a long time to buy a home because I lived in Boston. Running the actual numbers for my situation showed that renting was the optimal financial move at the time, because it freed up more cash flow each month that I could then contribute to investments to grow my assets.

Renting provides you with a fixed, stable cost that you can easily plan around each month. When you own a house, you’re always subject to unexpected expenses, repairs, or maintenance bills that can seriously bust your budget.

Buying a house is also something that requires you to have a fairly set long-term plan. The longer you stay in a home, the more likely it is that you will either break even on your costs when you go to sell or potentially make a profit.

There’s no reason to force yourself into homeownership, especially if you can’t afford it right now. As a renter, you have more flexibility to consider your options, move for your career (which could drastically improve your finances), or simply change up your living situation as you wish.

2. This isn’t a ‘spend money to make money’ situation

Making a profit at any point from the sale of a home is a big “if.” People tend to think real estate is a fantastic investment, but the truth is a lot more complicated.

That’s especially true when you buy a primary residence that won’t provide rental income, in a seller’s market where you know there’s a high likelihood that a property is overvalued due to demand.

So why do people insist that real estate is such a good investment? Because they tend to only look at top-line numbers: what they bought the house for, and what it is worth today.

This oversimplifies the situation, because it fails to consider:

  • The fact that your home equity doesn’t actually pay your bills. Zillow can tell you whatever it wants for your estimated home value, but the only thing that matters is what someone will pay for it if and when you try to sell.
  • The cost of property taxes and insurance over time.
  • Every single maintenance and repair bill you ever pay, from a $49 routine checkup on your washer and dryer to jobs that can cost tens of thousands of dollars to complete.
  • All of the cash you might put into renovations or improvements. While these can boost the value of a home, it’s very rare to recoup 100% of the money you spent and even more unlikely that you will make an actual return on a specific project.
  • The miscellaneous expenses of homeownership that we tend to forget: the lawnmower you had to buy (and eventually replace), the appliances you needed to purchase yourself (rather than a landlord taking care of it for you), the infinite amount of trips to Home Depot…
  • Opportunity cost, or what else you could have done with all the money you put into your house while you owned it.
  • The cost of interest. Depending on your mortgage interest rate, you will pay far more than just the sales price of the house over time if you spend a full 30 years paying off your mortgage.

Real estate can be a good investment. But for most people in most areas, a single-family home you own and live in yourself (rather than rent out) is a utility, not a moneymaker. For that reason, if you can’t afford to buy right now, you don’t need to force it.

3. Just because you can’t buy now doesn’t mean you can’t in the future

The first thing I ask someone if they come to me and say they can’t afford to buy a house is, do you have to buy right now? If not, the best answer may be to simply wait.

Waiting gives you more time to build up the cash flow, savings, and ongoing income needed to purchase a house. And with the market as crazy as it is in 2022, there may be advantages to waiting until the dynamics change and buyers aren’t in such a tough position.

If you can’t afford a home now, then a good course of action to take today is to get serious about your financial planning. Set a goal and make a plan to get to where you want to be in the near future.

4. Adjust your budget

But not everyone can wait, and in that case, the solution may be to adjust your house budget. While it may not be the answer that people want to hear, simply looking at homes in lower price ranges can provide you the opportunity to buy now rather than waiting.

Consider looking in a different location, searching for a smaller property, or accepting a home with less upgrades and improvements in order to find something that fits your financial reality.

Remember, just because you can’t buy your dream home right now doesn’t mean you can’t afford anything if buying a home is a top priority for you.