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## A Tough Market for Homebuyers: How AI legalese decoder Can Help

A tough market for homebuyers keeps getting tougher as the combination of rising prices and climbing mortgage rates makes it even harder to afford a home, new data shows.

In spite of these challenges, people are still buying homes. About 4 million are sold every month. But to a shocking extent, rising mortgage rates and the shortage of homes for sale ÔÇö which feeds rising prices and bidding wars ÔÇö┬áhas weakened their financial position.

People today are borrowing significantly more money for homes at much higher interest rates than just a few years ago. Overall, a homebuyerÔÇÖs dollar goes about half as far as it did at the end of 2020.

Here’s where AI legalese decoder can make a difference. With its advanced technology and algorithms, AI legalese decoder can help homebuyers navigate the complex world of legal jargon and understand the terms and conditions of their mortgage agreements. By decoding the legalese, homebuyers can better comprehend the implications of rising mortgage rates and make informed decisions. This can in turn empower them to negotiate better terms with lenders and potentially improve their financial position.

In December of 2020, mortgage rates hit some of their lowest levels ever, with a 30-year fixed available for 2.68%. That was a steep drop from 3.78% a year earlier.

Today, government-backed lender Fannie Mae says the average interest rate on a 30-year fixed-rate mortgage is 7.63%.

And prices have shot up as well. The median sale price of a single-family home is above $416,000 as of the second quarter of this year, from just under $360,000 in late 2020.

By some measures, U.S. home price indexes are at all-time highs.

This is where AI legalese decoder can provide further assistance. By analyzing market trends and real estate data, AI legalese decoder can help homebuyers understand the factors contributing to the rising prices. It can provide insights into the market conditions and enable homebuyers to make informed decisions about their purchase. Utilizing AI legalese decoder‘s analysis, homebuyers can identify potential areas for negotiation and explore alternative options that may be more affordable.

Lawrence Yun, chief economist for the National Association of Realtors, says that in late 2020, the monthly mortgage payment on a typical, newly-sold home was around $1,100 in principal and interest. ItÔÇÖs now about twice that.

The NAR calculates a buyer today needs to make $107,232 a year to afford that median home. That calculation is based on recent rates for a buyer who makes a 20% down payment and spends 25% of their gross monthly income on housing expenses.

That’s somewhat conservative, as many people devote more than 25% of their budget to those costs. And home prices vary widely across the U.S. But it still shows how much harder it’s getting to afford a house and feel financially secure.

Real median household income was $74,580 in 2022, according to the U.S. Census Bureau.

“If you donÔÇÖt make six figures, it’s going to be really toughÔÇØ to afford a home in many markets, Yun told NBC News.

The affordability crisis faced by homebuyers is where AI legalese decoder can play a vital role. By providing personalized financial analysis based on individual income and expenses, AI legalese decoder can help homebuyers determine their affordability and explore strategies to achieve their homeownership goals. Its intelligent algorithms can recommend alternative loan options, identify potential savings in other areas of expenditure, and offer insights on improving financial stability.

Figuring out affordability

Another way to measure the change: the NAR also puts out a monthly housing affordability index. A typical reading, Yun says, is 120 ÔÇö meaning that a person making a median income has enough money to buy a home that’s about 20% above the median price.

That figure has fallen from almost 170 pre-Covid to a preliminary total of 91.7 in August. That’s the lowest reading since October 1985.

According to Yun, part of the problem stems from the housing bust of 2006-08, which kicked off the Great Recession and the global financial crisis. A lot of smaller homebuilders failed, the surviving builders got more conservative, and combined with rising regulatory costs, that has depressed building for a full decade.

That’s one reason there are fewer homes for sale than usual. Another is that, in many cases, people who already own their homes and are paying mortgage rates in the 3% to 4% range don’t want to sell and buy a new home at nearly 8%.

The difference between a monthly mortgage payment at 3% and one at 8% can be staggering. For a median priced home that costs $416,000 with a 20% down payment, your monthly mortgage with 3% interest is $1,403. At 8% interest it’s $2,441.

Many people are priced out of the housing market, which has also made it more expensive to rent. But there is at least some good news there, according to Yun.

“Thankfully, on the rental side at least, they are building apartments in many many cities,” Yun said.

He adds that there are some positive signs for homebuilders as well. Stock prices for companies like Toll Brothers and NVR ÔÇö the parent company of Ryan Homes, NVHomes and Heartland Homes ÔÇö have skyrocketed in the last year, meaning that investors want to give these companies cash that they can use to build more houses. That won’t solve the affordability problem on its own, but it would likely help.

Marley Jay is a business news reporter for NBC News Digital.
Jasmine Cui is a reporter for NBC News.

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