Housing Affordability Is Set to Reach Lowest Level in 15 Years. Do These 3 Things if You're Struggling to Afford Your Home

Talk about bad news.

It's hardly a secret that home prices are through the roof these days. Throw in rising mortgage rates, and it's easy to see why so many prospective buyers are struggling to become homeowners.

In fact, home affordability is set to reach its lowest level in 15 years, according to S&P Global Ratings. By the end of 2022, it's estimated that mortgage payments will make up 28% of income for the typical first-time buyer. That's above the 25% threshold the National Association of Realtors considers affordable.

But while it's getting increasingly difficult for new buyers to afford a home, the reality is that many existing homeowners are also having trouble keeping up with their expenses -- especially now that inflation is driving up living costs across the board. If you own a home and are struggling with affordability issues, here are three options to consider.

1. Sell your home and relocate

The fact that home prices are super high isn't great news for buyers. But as an existing homeowner, it means you're unlikely to be underwater on your mortgage. And if that's the case, it means you may have the option to sell your home at a premium, and then take your sale proceeds and move to an area that costs a lot less.

2. Stay in your neighborhood, but sell and downsize

Uprooting your life and moving may be easier said than done. After all, if you have children, moving to a more affordable neighborhood could mean having to pull them out of their school district and away from their friends.

If that's not desirable, consider staying where you are but downsizing. Doing so might mean a lower mortgage payment, property tax bill, and insurance costs. And if you're heating and cooling less square footage, you'll probably shrink the cost of your utility bills, too.

3. Try monetizing a larger home you don't want to give up

Maybe you don't want to move out of your current home, period. If that's the case, but you're having trouble keeping up with the costs involved, try turning your home into a cash source -- at least a temporary one.

If there's a separate area of your home you can rent out for income, like a finished basement, find a tenant (provided your local zoning laws allow for that). And if parking is tough to come by in your neighborhood and you don't own a car, rent out your driveway for cash.

Another option? Rent out your home on a short-term basis during periods when you won't be in town. If you commonly visit family for the holidays, list your home on a site like Airbnb if it's in an area where lodging is high in demand.

While plunging home affordability levels are making it difficult for new buyers to purchase properties, many existing homeowners are also struggling with housing costs. If that's the boat you're in, be proactive about it -- before you end up harming your finances or risking unwanted consequences, like losing the home you love to foreclosure.