The housing market is very low on inventory all across the country. While there are still plenty of buyers looking for homes the housing market itself is slowing. More people, especially millennial’s, are forgoing home ownership for now. Part of that is because of high fees and costs that are hurting the housing market. Some of that decline is simply because of the inventory. There are not enough homes to go around. Some of that decline is due to the high cost of buying a home.
According to Investopedia Millennial’s aren’t buying homes at the rate of previous generations. Millennial’s compose the largest segment of the U.S. population, nearly one forth, and if they’re not buying homes that could create a problem for the housing market.
Affordability is a big issue. There has been a considerable rise in housing prices the last few years. That increase has put home ownership out of reach for many when you include the high cost of buying and selling a house.
Transaction Fees When Selling A House
The Cost of Selling a House with a real Estate agent can be expensive. If a brokerage charges 6% of the contract price when listing a home that is a substantial cut into profits for the home seller. For example for a $250,000 price tag the home seller loses a full $15000.
Think of what you could do with $15000.
Some potential home sellers simply can’t afford to sell their house. People are staying put for longer periods of time which means less people selling and moving. Many homeowners would like to move up, or downsize or move to a different area. High transaction fees often prevent that from happening.
Closing Costs When Buying A House
High Fees and Costs Are Hurting The Housing Market through the buyer too. Closing costs and prepaid are expensive and the responsibility of the buyer to pay. These costs cannot be rolled into the financing and have to be paid out of pocket.
After saving for a down-payment a buyer also needs to have thousands more on top of that to cover closing costs and prepaids.
What are closing costs? Closing costs are all of the banks and government fees and taxes. Closing costs can include, but not limited to:
- Loan origination fee
- credit report
- Appraisal fee
- Title insurance
- Closing fee paid to closer company. Could be a title company or a bank.
- Recording fees
- Underwriting fee
- Food certification
Prepaids are taxes and insurance. A mortgage payment consist of principle & interest (the money you borrow and what you pay the bank to do so) taxes and insurance. When a real estate transaction closes there is a certain amount of money that needs to be escrowed for those taxes and insurance. That comes out of the buyers pocket.
All Together
All together the radical increase in housing prices the last few years, the shortage of inventory and the high fees and costs are hurting the housing market. The American Dream of home-ownership seems to be slipping from the grasp of a lot of Americans.
You as a home seller have the power to help fix that. One solution to this national problem is for home sellers to forego the huge transaction costs, real estate commissions, and sell their homes themselves.