Looking to buy or rent a home in 2023? Here are some tips and strategies to make homeownership more affordable and navigate the current market. Learn about alternative mortgage options, how to diversify your investment portfolio and manage risk, and considerations for buying or renting a home. Find out how to build equity and achieve homeownership while meeting your financial goals.
Questions Answered in this Article
- What can I do to make homeownership more affordable? Consider alternative mortgage options such as the Neighborhood Assistance Corporation of America (NACA), get a roommate, or consider other housing options like a duplex or triplex.
- How can I diversify my portfolio? Invest in a range of assets such as stocks, bonds, and real estate to reduce risk and manage volatility. Avoid putting short-term money into the stock market and consider placing it in an emergency fund, high-yield savings account, or short-term fixed-income securities.
- How much risk should I be willing to take with my investments? Consider your personal circumstances and financial goals when determining the appropriate level of risk for your investments. Younger people who are further away from retirement may be more comfortable taking on greater levels of risk. However, it’s important to have a strong financial foundation and a diverse portfolio before taking on risk.
- What should I consider when buying or renting a home? Evaluate what you are willing to compromise on in terms of space, research mortgage options, save for a down payment, shop around for mortgage rates, use a mortgage calculator, and review your budget.
- How can I start investing if I am new to investing or have stopped due to financial constraints? Start small and support at a pace that feels comfortable for you. Consider lower-risk investments such as bonds, money market funds, or Treasury-Inflation Protected Securities (TIPS). Consult a financial advisor for personalized investment advice.
Summary
- Homeownership is still attainable but may require sacrifices in terms of space
- Alternative options for homeownership include the Neighborhood Assistance Corporation of America (NACA) and getting a roommate
- Building a diverse portfolio and taking calculated risks can help navigate market volatility
- Risk can be worth taking when you have a solid financial foundation, such as a stable income and an emergency fund
- Younger people and those further from retirement may be more comfortable with greater levels of risk
- Consider personal circumstances and financial goals when determining risk tolerance
- Lower-risk investments include bonds, money market funds, and Treasury-Inflation Protected Securities (TIPS)
- Factors to consider when buying or renting a home include mortgage options, down payment savings, mortgage rate shopping, and budget review
What am I willing to sacrifice in terms of space?
As you plan to buy or rent a new home in the coming year, there are a few key factors to consider. For example, the average 30-year fixed mortgage rate has seen significant increases over the past year, going from 3.45% in January to 6.90% in October due to inflation and several rate hikes by the Federal Reserve. The national median price of homes has also reached an all-time high of over $400,000, according to the National Association of Realtors.
Amidst these challenges, Zaneilia Harris, a certified financial planner and president of Harris & Harris Wealth Management Group, suggests that homeownership is still attainable but may require some sacrifices. She advises evaluating what you are willing to compromise on in terms of space in order to own property. This may involve starting with a smaller home, such as a condo or townhouse, and using the equity from that property to eventually purchase a single-family house.
How to Make Homeownership More Affordable in 2023
An alternative route to homeownership is the Neighborhood Assistance Corporation of America (NACA), a mortgage program that allows individuals to buy a home with no down payment, closing costs, fees, or stringent credit requirements. This program is available in 28 states and the District of Columbia and allows members to purchase their homes at a discounted interest rate. Another option for those hoping to buy a home in 2023 is to consider getting a roommate, as suggested by Jocelyn Wright, a certified financial planner and retirement income professional at PF Wealth Management Group in Pennsylvania. Wright personally did this with her sister in 2017, stating that it provided them with the opportunity to own a home and build equity.
Diversifying Your Portfolio and Managing Risk in the Current Market
In 2022, the S&P 500 saw a significant drop of almost 20% by the end of December. This market volatility may be causing uncertainty for investors. Financial experts suggest that building a diverse portfolio and taking calculated risks could be helpful for navigating the current market. It is important to remember the value of diversification, which is the practice of investing in a range of assets to reduce risk and manage volatility. The recent collapses of FTX and BlockFi serve as a reminder of the risks of investing too heavily in one area. As Wright points out, it is advisable to avoid putting short-term money, or funds that you will need within the next 3 years, into the stock market. Instead, consider placing these funds in an emergency fund, high-yield savings accounts, certificates of deposit, or short-term fixed-income securities such as Treasury bills.
Considerations for Buying or Renting a Home in 2023
In order to determine how much risk you should be willing to take when investing, it’s important to consider your personal circumstances and financial goals. While risk can be intimidating, it’s worth taking on when you have a solid financial foundation, such as a stable income, an emergency fund, and a diverse portfolio. Additionally, taking on risk can be particularly rewarding when you are investing for the long term.
According to Harris, younger people who are further away from retirement may be more comfortable taking on greater levels of risk. However, Harris also recognizes that some people of color may have historically been hesitant to take on risk due to various factors. She encourages these individuals to consider the potential rewards of taking on calculated risks.
If you’re new to investing or have stopped investing due to financial constraints, it’s important to remember that you can always start small and support at a pace that feels comfortable for you. This could mean investing biweekly, bimonthly, or monthly. To play it safe, you can also consider lower-risk investments such as bonds, money market funds, or Treasury-Inflation Protected Securities (TIPS).
Conclusion
In conclusion, homeownership is still attainable in 2023 but may require some sacrifices in terms of space. There are several strategies you can consider to make homeownership more affordable, such as looking into alternative mortgage options like the Neighborhood Assistance Corporation of America (NACA), getting a roommate, or considering other housing options like a duplex or triplex. It’s also important to diversify your investment portfolio and take calculated risks to navigate the current market. When determining your risk tolerance, consider your personal circumstances and financial goals. If you are new to investing or have stopped due to financial constraints, you can start small and invest at a pace that feels comfortable for you. There are also lower-risk investment options available such as I bonds, money market funds, and Treasury-Inflation Protected Securities (TIPS). When buying or renting a home, be sure to research mortgage options, save for a down payment, shop around for mortgage rates, use a mortgage calculator, and review your budget. By considering these factors and making informed decisions, you can work towards achieving homeownership and meeting your financial goals.