Q: Our son and his wife are looking to buy a home in Traverse City. Our advice to them is difficult to give and certainly for them to receive. Perhaps that’s due to our long memories of the reasonable home prices of yesteryear! Any advice you can give them and us would be appreciated.
A: Giving advice to others is often hard, especially when it’s unsolicited! But, as a parent, I know it’s nearly impossible to remain silent. Hopefully, your son and daughter-in-law will take any advice you offer as heartfelt. Acknowledging that you may have some preconceived notions of what you see as value will demonstrate your sincerity.
Younger adults face a totally different environment than the generations of homeowners before them. With 30-year, fixed rate mortgage rates skyrocketing from a bit above 3% to now over 8% in just two years time, buying an identically priced home results in a 70% higher monthly payment. Adding insult to injury, since just before Covid hit, home prices have jumped over 40% nationally.
Taking these two facts in combination – higher rates along with higher prices – homebuyers today face more than a doubling of their housing costs compared to just a few years ago. This indirectly feeds into higher rental rates for those who are unable to even consider buying a home. There really is no way to escape the situation as everyone, in the end, needs a roof over their head. And, honestly, there is no way for society to ignore the situation, either. But, solutions are hard to come by.
I’m afraid my advice will feel awfully basic.
Before buying a home, your son and daughter-in-law need to be confident that their income is very secure. Their higher mortgage obligation will no doubt place a strain on the rest of their budget. The greater share of their income dedicated to their housing cost will impact their ability to spend on other things like travel, entertainment and eating out, let alone funding their other necessities.
While living close to both work and play is really attractive, considering a home outside of town might afford them the money to actually enjoy the amenities of our area. This is a real trade-off. But, you should know that this advice might smack of hypocrisy coming from someone who was lucky enough to buy a home in town years ago before the surge in prices.
Our area is wonderful in so many ways, but it’s obvious that the access to this wonder is not spread evenly among us. While I imagine you have full perspective, it’s always important to recognize that your son’s challenge in deciding where and when to buy a home in our area is a truly fortunate problem to have. It might be a lot tougher for many others.