The “American Dream” of homeownership still has a powerful siren song for many would-be homeowners and it can lead people to do some risky things in order to be able to jingle that special set of door keys in their pocket. According to the Owners.com Home Buyer Study 2017, which evaluated the self-described thought processes of consumers currently considering a home purchase in the next 12 months, a number of this years’ potential buyers are more willing than the population, as a whole, has been recently to let financial common sense give way to the lure of homeownership. This tendency to let passion overrule logic may be due in part to fears that mortgage interest rates will rise and price potential buyers out of the market later this year. And particularly informed buyers may also be concerned if President Trump’s U.S. Treasury secretary, Steven Mnuchin, gets his way, the privatization of Fannie Mae and Freddie Mac could wreak havoc on the market. Making it difficult for them to finance a home in the latter half of 2017.
Whether these fears are justified or not, the end result is that it appears 2017’s buyers are gearing up to take some risks in order to get to the closing table. Here are three of the most-likely risky moves you’ll encounter if you’re working with buyers in the coming year:
- Putting their emergency fund contributions on hold
Homeowners say they are willing to put funds that would normally go into an “emergency fund” toward saving for a down payment, at least temporarily. According to the survey, more than 60 percent said they would put emergency-fund building on hold so they would have enough cash on hand for a bidding war on the home of their choice. And to make a large enough down payment that they could keep their monthly mortgage payments affordable. - Stopped making other investments entirely
Many would-be buyers report how they have not only stopped building up an emergency fund but have opted out of making contributions to their retirement accounts as well. While many people use their self-directed IRAs and 401(k)s to purchase investment properties, it is prohibited for your retirement account to purchase your personal home in nearly all circumstances. As a result, many homebuyers feel they have to put retirement contributions on hold until they have at least made their down payment on a personal residence. - Quit taking care of their health
According to the survey, the majority of consumers who are considering buying a home in 2017 have quit going to the gym and otherwise paying for health and fitness guidance and instruction. Is this a risky financial move in the traditional sense? Not necessarily. However, long-term failure to sustain your health certainly can eventually create a serious drain on your finances, not to mention abbreviate the period of time during which you can fully enjoy your homeownership. Those would-be homeowners who have suspended or canceled their gym memberships cite the ongoing fees and related costs of professional fitness training as the reason for the move. While they may return to their healthy habits once they’ve closed on a new home, breaking those healthy habits will make them far harder to resume.
You can read more of Carole’s coverage of this and other topics at www.selfdirectedinvestor.org.
About the Author
Carole VanSickle Ellis serves as vice president of research and analysis at the Self-Directed Investor Society, helping investors “declare independence from Wall Street.” Contact her at editor@bryanellis.com or visit sdiradio.com.
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