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Gen Zers Regret Buying Fixer-Uppers, New Report Finds

About 22% of Gen Zers see the lack of affordable starter homes as a barrier to homeownership, leading some to consider fixer-uppers. A fixer-upper is a house needing various maintenance work, typically offered at a lower price. According to a Clever Real Estate report, 57% of Gen Zers are willing to buy a fixer-upper. However, among the 40% who did purchase one, 27% regret their decision. This regret is often due to unexpected renovation costs and the reality of maintaining an older home.

The median cost of a fixer-upper is $283,000, about 29% lower than that of a move-in-ready home. Yet, buying such a home requires careful consideration of renovation expenses and functionality. Key areas to inspect include the roof, plumbing, electrical system, walls, stairs, and overall land condition. While some Gen Z buyers are willing to take on homes with significant disrepair, it’s crucial to ensure the property is safe and livable. Despite potential savings, fixer-uppers’ financial and logistical challenges can overwhelm first-time buyers.

Refinance Demand Hits 2-Year High as Rates Drop

Mortgage rates fell to their lowest level since March last week, spurring a notable increase in refinancing demand. Refinance applications surged 15% from the previous week, reaching their highest level since August 2022, and were 37% higher than the same week last year. However, this surge comes from a low base, with demand still over 70% lower than early 2020 levels before the pandemic. The average contract interest rate for 30-year fixed-rate mortgages dropped 6.87% from 7.00%.

In contrast, home purchase applications declined 3% for the week and were 14% lower than a year ago. The current market is challenging for buyers due to high prices and limited supply. Many potential buyers are waiting for rates to drop further as more homes gradually come onto the market and sellers start to reduce prices. Despite a strong retail sales report, mortgage rates have remained relatively stable this week.

Housing Market to Guide Fed Rate Cuts

Since fall 2022, the housing market has needed lower interest rates to address issues like affordability and reduced activity for companies tied to homebuilding. However, the Federal Reserve’s focus was on controlling inflation rather than aiding the housing market. Recent economic data has shifted priorities, with investors expecting interest rate cuts starting in September to support the labor market. This means the Fed now views housing as a crucial sector to monitor for economic balance. The rising unemployment rate and business reluctance to hire indicate a need for lower interest rates to boost demand and spur hiring.

Lower borrowing costs would benefit the housing market significantly. Current home sales are 25% below normal, and many homeowners are sitting on untapped home equity. Increased transactions would provide work for real estate professionals and boost industries related to home improvements and furnishing. Mortgage rates of around 6.5% are seen as a potential trigger for increased housing activity. The extent of the Fed’s rate cuts will depend on how effectively lower mortgage rates revive housing transactions and support the labor market. If 6.5% rates are insufficient, further easing might be necessary to stabilize the economy.