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The dream of homeownership feels out of reach for many, with 70% of Americans in an IPX study saying buying a home in 2024 seems unrealistic. High mortgage rates are a major obstacle, with over half of potential buyers waiting for rates to drop.’
While the Federal Reserve has cut rates by 0.5% twice this year, the 30-year fixed mortgage rate still averages 6.79% — far higher than expected. Experts predict rates may ease slightly but remain near 6% into 2025, nearly double what they were three years ago. Unfortunately, even lower rates won’t solve the broader affordability challenges in housing. When supply is low and can’t meet demand, prices surge because people are willing to pay more to get their hands on the limited inventory.
A housing shortage has driven up prices
When supply is low and can’t meet demand, prices surge because people are willing to pay more to get their hands on the limited inventory.
Unfortunately, this is one of the most significant issues in the housing market. A Zillow analysis released in 2024 found that, as of 2022, the U.S. had a housing shortfall of 4.5 million homes, up from 4.3 million the year prior. Too few houses were built in the decade following the Great Recession, and strict land-use rules have made it hard for builders to build enough to catch up.
As mortgage rates fall, some experts believe buyers will flood the market, sending prices soaring and putting homes even more out of reach for many.
If you are determined to buy a home, there are ways you can help bring down the cost finance your milestone purchase.
According to a report from LendingTree, shopping around for a mortgage can help you save an average of $76,410 over the lifetime of a 30-year fixed-rate loan.
Once you have picked your desired property and downpayment, you can [compare rates from vetted lenders] ](https://moneywise.com/c/1/33/1938?placement=1) through Mortgage Research Center.
You can then connect with a preferred lender and discuss your mortgage needs. The initial consultation is completely free and with no obligation to hire.
Home insurance costs are also soaring
The cost of the house itself isn’t the only thing that’s rising. Homeowners insurance premiums jumped 11.3% in 2023, up from an average annual increase of 2.5–3.8% between 2018 and 2021, according to S&P Global Market Intelligence.
Insurance costs significantly impact monthly housing payments and are factored into the PITI (principal, interest, taxes, and insurance) calculation used to determine loan eligibility. With banks aiming for PITI to stay below 28% of income, rising premiums are pushing homeownership further out of reach.
So, how do existing homeowners protect their investment without breaking the bank on their insurance? Consider using a free service like BestMoney to find home insurance policies and prices near you.
BestMoney simplifies the process of finding coverage that fits your needs and budget. With their user-friendly platform, you can easily compare home insurance rates in your area just by answering a few quick questions about you and your property.
How can we fix it?
Mortgage rate cuts won’t fix soaring housing costs, as the real solution lies in increasing supply.
The National Association of Home Builders suggests reducing regulations, streamlining supply chains, and using tax credits to boost affordable housing. Lawmakers also propose opening federal lands, offering down payment grants, and easing zoning rules.
Invest in high-demand real estate without buying property
There are also plenty of real estate investment trusts (REITs) that cash out monthly dividends to their investors from their rent-paying tenants, not to mention crowdfunding platforms that offer everyday investors access to everything from vacation and rental income to investing in residential rental units in high-demand regions.
When it comes to REITs, there’s also a private-market option worth considering that focuses on property investments that aim to be part of the solution to the housing shortage.
DLP Capital specializes in private REITs designed for accredited investors, focusing on regions across the U.S. where multifamily residential properties are in high-demand.
With a track record of identifying high-potential properties and over $5.2 billion in assets under management, DLP Capital helps investors capitalize on real estate’s long-term value.
DLP Capital’s funds target potential annual returns between 9% and 13% — almost at par with the S&P 500 index’s 10.26% returns annually. But you get two distinct advantages by investing in DLP Capital’s funds — portfolio diversification and a potentially lower tax bill.
If you are interested in tapping into the income generated by vacation rentals, crowdfunding platform Arrived makes investing in these properties simple and accessible for everyday investors.
Backed by world-class investors like Jeff Bezos, Arrived offers SEC-qualified investments in rentals and vacation homes and you can invest for as little as $100. The firm handles the hard work, letting you browse their curated properties, select the number of shares you’d like to buy, and add real estate to your portfolio without the hassles that come with being a landlord.
And when it comes to income-producing real estate investments, you aren’t limited to residential opportunities.
In September, the U.S. central bank started moving aggressively in this new direction and cut interest rates by 50 basis points (bps). Rates were cut by a further 0.025% in November.
Commercial real estate typically appreciates in value when interest rates drop because buyers can afford to pay more for assets at lower borrowing costs. If you want to invest in the $22.5 trillion commercial real estate market, First National Realty Partners (FNRP) allows accredited investors access to institutional-quality commercial real estate deals, specializing in grocery-anchored retail properties with historically strong return potential.
FNRP has developed relationships with the nation’s largest essential-needs brands, including Kroger, Walmart and Whole Foods, and provides insights into the best properties both on and off-market while investors can passively collect distribution income.
FNRP’s team makes investing in commercial real estate convenient and simple by offering white-glove service to investors. They act as the deal leader, providing expertise and doing the legwork, while investors can use their secure platform to explore available deals, engage with experts and easily make an allocation through their secure platform.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
