The American Dream Isn’t So Dreamy

For decades, Americans have idealized home ownership making it a pinnacle of financial stability. In fact, almost 80% of Americans consider home ownership part of the “American Dream” according to the Bankrate’s March 2024 Home Affordability Survey. ⁽¹⁾ 

However, for the last few years, some of our clients and friends who live in urban areas have questioned whether home ownership is financially feasible. 

Many factors, both upfront and ongoing, inform the decision to buy real estate. Upfront factors include saving for a down payment, current interest rates, the credit rating of the buyer, additional savings for repairs and closing costs, and home prices in the area. Once purchased, the homeowner must also consider their ability to comfortably pay ongoing expenses like their monthly mortgage payment, property taxes, homeowner’s insurance, HOA dues and any private mortgage insurance, if applicable.  

A potential buyer has direct control over some of these factors like saving for a down payment and their credit score. A good financial plan (and financial planner!) can help a buyer who might be struggling to save for a down payment due to the current cost of living or whose credit score needs some bolstering.   

Other factors, like home prices and interest rates, are mostly out of the control of the buyer. Here, too, a financial planner can help a homebuyer determine how much home they can comfortably afford (which could likely be less than what the realtor might suggest!) and whether renting may be a better option while they’re saving for home ownership. 

If all this has you feeling that your American Dream is more like a nightmare, fear not! 

We have three tips to help position yourself for home ownership sooner than later: 

1. Create an automated savings plan for a down payment and closing costs. Creating an automatic transaction from your paycheck to your designated saving account can be a powerful tool, financially and emotionally. It potentially increases the likelihood that funds will actually be saved every month, and even a small monthly transaction makes for a great starting point for your down payment and closing costs.
2. Monitor, and as necessary work to repair or increase your credit score. If you’re married, make sure to do the same for your spouse. Lenders will look at both credit scores and often use the lower of the two when determining interest rates. If you are carrying large credit card balances and making minimum payments, the best way to increase your credit score is increasing monthly payments and if possible, paying your card off completely to avoid interest accrual. Also, be sure to pay all your bills on time!
3. Be patient and stay disciplined. The road to home ownership takes time and determination. Create and maintain good spending habits. As income increases, try to avoid also increasing expenses. Instead, increase the amount you’re tucking into your savings account for the down payment. This way, the added income can potentially boost your home savings goals!  

We all want financial stability, security, and to have “made it.” For some, the American Dream of homeownership may take longer than they’d hope but the good news is that with a plan and a purpose, you can help secure the home that’s right for you (and, sometimes that may be a rented home...but that’s a topic for another blog!). We have many more ideas that help our clients achieve their goals—homeownership and more—and would be happy to learn about yours and discuss how we can help set you up for long-term success.  

Disclosure: 

Apella Capital, LLC (“Apella”), DBA Apella Wealth is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempt from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Apella Wealth provides this communication as a matter of general information. Any data or statistics quoted are from sources believed to be reliable but cannot be guaranteed or warranted. 

This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only and on the understanding that the recipient has sufficient knowledge and experience to be able to understand and make their own evaluation of the proposals and services described herein, any risks associated therewith and any related legal, tax accounting or other material considerations. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, prospective investors are encouraged to contact Apella Capital LLC or consult with the professional advisor of their choosing.  

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