by Maurie Backman | April 20, 2021
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Here's why U.S. vets are struggling to become homeowners -- like so many other Americans.
Though 2020 was a tough year for a lot of people, financially speaking, U.S. veterans agree that 2021 is a good time to buy a home. According to Veterans United Home Loans' 2021 Veteran Homebuyer Report, 1 in 3 veterans plans to buy this year, while 58% intend to buy within the next five years.
But like many Americans, veterans face their share of challenges on the road to homeownership. Here are some of the things that have been holding them back.
Home prices have skyrocketed in the course of the pandemic, and now, even markets that were once affordable have grown increasingly out of reach. In fact, 51% of veterans believe that homes will become less affordable this year. Of course, whether that comes to be will largely hinge on where inventory ends up. With the spring influx right around the corner, a boost in inventory could bring prices back down.
From the summer of 2020 through the end of the year, mortgage rates sat at or near historic lows. But over the past month or so, rates have steadily increased, and while they're still competitive, historically speaking, they're not nearly as attractive as they were a few months back. What's more, 58% of veterans believe mortgage rates will increase in 2021 (as they've been doing over the past several weeks). Of course, home loan applicants with strong credit may find that they're eligible for a lower mortgage rate than expected. Similarly, those who take out a 15-year loan could snag a discount by opting for a shorter repayment period.
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Many sellers have held off on listing their homes during the pandemic. For some, it's been a matter of not wanting to deal with showings and open houses during a national health crisis. For others, it's been a reluctance to make a big change at a time when the jobless rate is so high and there's a lot of general economic uncertainty. Not only has low inventory helped drive housing prices up, but it's also put a lot of buyers in a position where they can't find homes that meet their needs. For example, in some markets, there's been a dearth of starter homes, which has been a huge issue for first-time home buyers in particular.
The coronavirus pandemic has upended a lot of people's lives, and unfortunately, it's not yet behind us. And while many of us would like to be optimistic that vaccinations will help get the crisis under control, we're not there yet, and many states are still seeing a spike in COVID-19 cases. It's not surprising, then, that 46% of veterans cite the COVID-19 pandemic as a source of uncertainty and a barrier to buying a home in 2021.
The good news for veterans is that VA loans make it possible to purchase a home with no money down. The bad news for veterans, and home buyers in general, is that housing prices are sky high, mortgage rates aren't as low as they were late last year, there's a limited selection of homes on the market, and there's still a raging pandemic to grapple with. All of this makes it a tricky time to buy a home. And while a large number of veterans may want to buy this year, many may make the decision to delay that move until 2022 -- or possibly beyond.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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