June is Home Ownership Month, and many Americans may be contemplating if now is the best time to buy a home. Homeownership can provide benefits to families, neighborhoods, and communities across America. But this year, with our current housing market landscape, Home Ownership Month is a little different. Here’s why:
Most Americans still want TO own A home.
Why are many Americans still allured by the idea of having their own home? Homeownership is still very much thought of as a part of the American dream. Nearly two-thirds of millennials and 45% of Gen Z say a desire to be a homeowner is the main reason they buy a home.
The benefit of building equity via owning a home as opposed to helping someone else financially is very much still real as well. In the United States, many people lean toward homeownership as it is a part of our cultural mindset and economy.
Are we in a housing bubble?
It is increasingly evident that COVID-19 and working from home is driving demand for homes and increasing prices across the U.S. There is increasing concern from consumers that there is a housing bubble and anxiety about when the bubble will burst. Google recently reported that the search “When is the housing market going to crash?” had spiked 2,450% in the past month. Also, more than half of this year’s first-time homebuyers expect some competition, while one in five believe they’re in for a lot of competition.
Don’t panic.
Experts say we shouldn’t panic as not all bubbles look like the one from 2008. So, while the housing market has low inventory, high demand, and a risk-averse lending environment, extreme spikes in home prices could result in some prices returning to normal soon.
Should you save for a down payment or use your retirement assets?
You can use your 401(k), but it comes at a cost. Here’s the low down on using retirement assets for a down payment:
- You can use 401(k) funds to buy a home by taking a loan from the account or withdrawing money.
- A 401(k) loan is limited in amount and must be repaid with interest. However, it does not incur income taxes or tax penalties.
- Your 401(k) withdrawal is generally limited to the amount of the contributions you made to the account and can avoid penalties if it is classified as a hardship withdrawal. However, the hardship classification will incur income taxes.
- Withdrawals from Roth IRAs, and some other IRAs, are generally preferable to taking money from a 401(k).
If you have questions about saving for a down payment or if you should use retirement assets for a down payment on a new home mortgage, we have the financial professionals that can provide you with these answers.
