Since the Fed lowered its rate half a percentage point last week, the question is will this be instrumental in having more purchasers enter the market? I do not think so.  There will be a small group of financially able consumers who will benefit, however.  But I do not think this will enable the majority to make purchases.

Will the rates ever go back to the low rates that we experienced? I doubt that, too.  That event was a once-in-a-lifetime situation.  So what does one do to be able to secure homeownership leading to building some future wealth?

This is the moment in time to consider partnering up with parents, relatives or significant others to step in the direction of owning a home.  Pooling and combining incomes to be approved for a mortgage could be a solid path to pursue.  Pew Research did research and in 2022, https://pewrsr.ch/47Cv2Fz that found 31% of young adults ages 25-29 were living with an older family member.  Among men, 37% in the same range were still living in multi-generational situations.  Thirty-six percent of women in the same age bracket also lived in generational environments.

Increased immigration of Hispanics and Asians as well as some members of the Black population with inadequate funds lived together, making it more doable financially. The main reason was the lack of financial stability as well as care for a family member.  A caretaker living with parents today can be paid through Medicaid. The pandemic has caused one in eight adults (13%) to live with a family member.

However, 25% experienced more stress in those caretaker situations while twice as many felt they living in a more comfortable environment. According to an analysis of census data from 1971-2021, the number of people living in multigenerational family households quadrupled during that period, reaching 59.7 million in March 2021. Their numbers more than than doubled to 18% of the U.S. population.

The best approach would be to find a multi-family property that will allow you space and greater privacy.  Finding a place that has more than two apartments will enable the other tenants to contribute to the overall mortgage and real estate expenses.  It is all predicated on what the family qualifies for in financing.  A larger mortgage will provide for more opportunities to afford a larger home or apartment building.   Moreover, larger down payments will also create a stronger position for your lender to provide an adequate mortgage.

Living in a group will enable many to save money and eventually allow them to purchase. The important issue is that prices do not look like they will be coming down anytime soon, without a drop in demand or some longer-term monumental issue occurring.  The recent Fed rate reduction may reduce the cost of purchasing.  However, this will depend on your income, credit, and debt/income ratio.  When you are in the top tier, your rate will be the lowest.

If generational living is not feasible, then renting locally or even moving out of New York State will be your options. Renting in the top 50 cities is currently more economical than purchasing.  Kiplinger’s Personal Finance magazine had an article May 1 that delved into comparing buy vs. rent today. https://bit.ly/3ZzeAnB The savings were dramatic, especially in California (San Francisco-Oakland-Berkeley areas) where the rent-to-buy ratio at that time was 180.7%.

However, on the flip side, Long Island has been somewhat resilient in its economy and housing market.  Our housing inventory has been so historically low and demand still very brisk that it has kept prices very strong.  Nassau County’s median price in July 2024 was $849,000.  In Suffolk County the median sales price was $749,000.

Looking back to 2019. I saw the market beginning to slow as it was heading to the end of a cycle.  This one had bottomed in 2011 (after the implosion of the market in 2008) and housing prices began increasing.  So then in March 2020, when the Covid virus hit, people began leaving major cities.  This is one of the factors that fueled the market, especially with the advent of hybrid work environments and millions who weren’t able, couldn’t or didn’t go back to their offices.

The lowest rates in history and the excess expansion of our currency entering the market, began to drive sales, creating a feeding frenzy and devastating inflation including supply chain shortages.  As prices increased with demand, buyers started to leave the market and consider renting.  Interest rates increased 11 times, fueling the rental market.  As sales continued to recede, demand was still constricting inventory.  Sellers pulled back and stayed where they were due to the much higher rates, since 65% had already refinanced at much lower rates and weren’t going to give them up.

Many purchasers abandoned the market to go into rentals, creating abnormally high demand, thereby increasing prices in both Long Island counties.  But looking at the costs of buying vs. renting, the latter now makes more sense in the brain and cents in the pocket.

So generational living may not be available to you.  But at the same time, affordability and being stretched with a mortgage, taxes and upkeep aren’t in the cards.  However, renting will provide you with an advantage in saving up more for a down payment. There are choices, but being prudent and more conservative in your decision-making will keep you in a safer position now and in the future when you will be capable financially to purchase

Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. For a free 15-minute consultation, value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: Phil@TurnKeyRealEstate.Com or via https://WWW.Li-RealEstate.Com