Today’s housing market can feel like a dream killer. Rising mortgage rates, high home prices and a shortage of properties for sale deliver a one-two-three punch.

If you’ve been knocked out of one too many deals and need a timeout, here’s how to regroup and keep the homeownership dream alive.

Give yourself a break

Given the rise in home prices and interest rates, the monthly mortgage payment for a median-priced single-family home with a 10% down payment has jumped by about $800 since January, according to a June 2022 National Association of Realtors® press release.

That’s huge.

It’s OK to hit pause if you’re frazzled to the point that you can’t think clearly or are simply priced out.

“If it doesn’t feel right to you … step away and give yourself some breathing room,” says Catalina Franco-Cicero, a certified financial planner with Tobias Financial Advisors in Plantation, Florida. “It’s OK to do that.”

But stepping back doesn’t mean giving up.

“One thing we tell people with any goal that you have is that there’s a big difference between ‘no’ and ‘not yet,’” says Nathaniel Moore, a certified financial planner and president of Agape Planning Partners in Fresno, California.

Strengthen your finances

View the break as an opportunity to get your finances in even better shape.

Use a mortgage calculator to estimate a monthly mortgage payment, including estimated property taxes and home insurance. Then add utilities plus 20% of the monthly mortgage for unexpected maintenance and repairs, Moore suggests. Subtract your rent payment from that amount and set aside the rest in a high-yield savings account.

“That way, if and when you can get in the home, you don’t have sticker shock or you’re not house-rich and cash-poor because you didn’t account for the other expenses,” Moore says.

He likens the transition to a relay race. “You want to have a smooth baton handoff, from the ‘renter you’ to the ‘homeowner you.’ If you’re not ready to walk in that house and afford the ancillary costs of living there, that’s when the baton fumbles and drops,” he says. “You want to get to the place where the rental person is running at the same speed as the homeownership person so when the baton is handed off it’s a smooth transition.”

When you’re ready to buy, you can add that extra money you’ve socked away to your down payment, which will help you make stronger offers and may qualify you for better mortgage rates.

“Nobody can truly predict interest rates nor inflation, nor the appreciation rate of homes in a relatively short period of time,” Eric Lefkowitz, president and chief operating officer of Motto Mortgage Mint in San Diego, said via email. “But we can be certain that buyers should be saving for strong down payment options. This will ensure they can get the best available interest rate when the time comes.”

Pay down debt

Paying down credit cards and other debt will improve two measurements: your credit score and your debt-to-income ratio, or DTI. Both are key factors that lenders consider when deciding whether you qualify and at what rate.

A good DTI – the percentage of gross monthly income that goes toward debt – is generally under 36%. The lower the better.

Your credit score is based in part on credit utilization, the percentage of available credit used. Shrinking your debt will lower credit utilization and help your score. Meanwhile, keep making on-time payments to preserve good credit.

“It’s going to give you a better mortgage rate and more options,” says Deb Gillard, a real estate agent with RE/MAX Venture in Owatonna, Minnesota.

Avoid optional big expenses

Resist the temptation to vent your frustration in a spending splurge, whether it’s running up a credit card balance or buying a new car when the old one suffices.

“That’s the last thing you want to do when you’re taking this pause,” Gillard says.

Another enticement may be to move to a nicer apartment. But stay put if you can, advises real estate broker Peggy Pratt, who leads the Pratt Properties Team of Century 21 North East in the Boston area. Paying the security deposit and other moving expenses could cut into savings for a down payment.

Reevaluate your wants and needs

This is a good time to look at the big picture.

“People need to do some soul searching to say, ‘What am I looking for in a home?’” Moore says.

Given home prices and mortgage rates, you may need to adjust your filters. You may need to shop for homes in a different neighborhood or buy something smaller than originally imagined. If the aim is to buy a starter home, build equity and upgrade in a few years, then that flexibility may pay off.

“Homeownership is a step-by-step opportunity,” Lefkowitz said. “You are not committing to stay in a home forever.”

If you could work elsewhere, another option you might consider is relocating to a less-expensive housing market, Franco-Cicero says. That’s a big decision. Taking a pause can give you time to research the quality of life and cost of living in other locations and weigh whether you want to live somewhere else.

Keep in touch with your agent, lender

Besides fine-tuning finances and reevaluating goals, keep in touch with experts you trust who can watch the market and bring you back in when you’re ready, Lefkowitz said. “This includes a strong Realtor and mortgage professional,” he said. “Together, that partnership can keep the buyers’ best interest top of mind and be ready to pounce on an excellent property when it becomes available.”

Let them know if you can make a bigger down payment, for instance. Keep your agent updated on when you might be ready to jump back into the market and the types of homes and areas you’re willing to consider.

Pratt says she counsels clients to maintain realistic expectations and not give up.

“Hang in there,” she says. “Something will come.”

In the early part of the 20th Century, American humorist Will Rogers was quoted as saying, “Buy land. They ain’t making any more of the stuff.”

Real estate can be a wonderful investment, but buying property isn’t as simple as Will Rogers led people to believe. Investing in certain kinds of real estate can be a financial mistake. Let’s consider eight of the worst types of real estate to invest in.

Doesn’t produce income

Drive down any main street in small-town America and you’ll find dozens of empty storefronts available for lease or for sale. Some of these retail spaces have been vacant for years. They may have held thriving businesses at one time – but then the mall opened on the outskirts of town, or the big box store offered cheaper prices. These main street businesses may have survived the mall or Walmart, but they couldn’t see their way through the Great Recession, the competition of online retailers or the shut-downs of COVID-19.

It may be tempting to think, “Look at that store building. The price is so cheap. Let’s buy it and maybe we can sell it in a few years at a nice profit!” But that store building may have been vacant since 1995. If it couldn’t be sold and used then as a retail establishment, what makes you think you’ll be able to sell it at a profit today?

Negative cash flow

Tied in with a lack of income is a negative cash flow for a piece of property that’s for sale. If you wouldn’t buy real estate that doesn’t produce income, why would you buy a property that costs more to maintain than what it brings in? Do you know how to spell M-O-N-E-Y- P-I-T?

Too extravagant

What if the house that you want to buy and then rent out is as fancy as a mansion of the 1%? If a family could afford the monthly rental payment of such a home, why wouldn’t they just buy it for themselves? You don’t want to purchase a house for a rental property that’s as fancy as George Vanderbilt’s Biltmore House (Yes, I’m being sarcastic). Those who could afford the high rent could also afford to purchase their own home. And there you sit with an empty house. And no income.

Too expensive

Just ask any hard-working middle-class American family – it’s no fun having more money going out than what’s coming in. It’s always a good idea to follow the 28% rule – although some call it the 25% rule and others refer to it as the 30% rule. It simply means that a household shouldn’t spend more than 28% (or 25% or 30%) of its gross monthly income on total household expenses.

Housing developments

Throughout the United States there are defunct housing developments that never quite made it. The developers may have even improved the land by adding sewer, water and electrical utilities. They may have even put in curbs and gutters, as well as street pavement. But there are no houses (maybe one or two if they got lucky). There are no businesses. Chances are these developers went bankrupt.

It seems like the majority of such failed developments are located in states like Arkansas, Arizona and New Mexico, but every state has them. Probably the most egregious example of such a failed endeavor was the I-30 Condo Scandal of Garland, Texas (a suburb of Dallas) in the 1980s. If you drove east out of Dallas on I-30 at that time, you undoubtedly passed acres of half-built condominiums and empty cement slabs. The developer, Danny Faulker, ended up in jail with a 20-year sentence, but only served 4 because he suffered from terminal cancer. This debacle helped precipitate the Savings and Loan crisis of the late 1980s and cost taxpayers close to $1 billion.

Real estate purchased only for appreciation

Astute investors who have a pulse on future trends have sometimes made oodles of money by purchasing undeveloped land with the goal of selling it when prices increased. An example of doing this successfully can be found in the area just east of Lake Sammamish in the Seattle area. In the 1970s and earlier, this area from the lake to the Cascades was rural, with few homes and a handful of small towns.

But once Microsoft moved into Redmond, there was a building boom and that area is now filled with exclusive neighborhoods. In 2019, Sammamish, Washington was considered the richest city in America. Those who owned parcels of this undeveloped land prior to the Sammamish building boom came out like bandits.

But there are just as many – or even more – purchasers of undeveloped land who have lost everything. They purchased raw real estate at the wrong place and at the wrong time. Unless you have experience successfully predicting the future growth and development of an area, this is probably an investment strategy to stay away from.

Vacation timeshares

Timeshare property has been around since 1969. The average cost of a timeshare today is $22,942 with an average annual maintenance fee of around $1,000. There’s also the stressful experience of dealing with pushy salesmen or the difficulty of trying to get out of a timeshare contract.

Is all that worth it for a week in a vacation condo? Why not just vacation at a beach hotel, at the time and location that best fits your schedule and your interests?

The nicest house in a neighborhood

You’re shopping for a house to invest in or to live in yourself. A beautiful five-bedroom two-story goes up for sale in a neighborhood of three-bedroom bungalows. Not only does the house have room for a large family, but there’s also a built-in swimming pool in the backyard! The price seems decent for the square footage of the house, but because of its size, it’s more expensive than other homes for sale in the neighborhood.

Such a purchase may be tempting, but think about it – will this property appreciate in value compared to the other homes in the area? Remember, too, that there are no promises the rest of the neighborhood will improve. When the time comes to sell your beautiful five-bedroom two-story with its built-in swimming pool, will potential buyers want to live in a neighborhood of bungalows?

Bottom line

Investing in real estate can be both economically and personally rewarding. It’s important, however, to be aware of the pitfalls, and to understand that there are several types of real estate that you should probably stay away from. Will Rogers was right when he opined about land – “They ain’t making any more of the stuff.” But keep your eyes open and use your head so your purchase can be beneficial to your economic well-being.

TALLAHASSEE, Fla. – From the environment to mortgage aid, septic tanks to licensing, a roster of new Florida laws passed by the 2022 Florida Legislature and signed by Gov. Ron DeSantis go into effect Friday. They include:

Hometown Heroes – The 2022-2023 fiscal year budget (HB 5001) include $100 million to fund the Hometown Hero Housing Program backed strongly by Florida Realtors®. The revolving loan program provides some upfront homeownership costs to help qualified firefighters, law enforcement officers, teachers, nurses and other hometown hero professions become homeowners. It provides zero-interest loans to help with down payment and closing costs. The loan is repaid once the home is sold, rented or refinanced, creating a continuous cycle of homeownership for some of Florida’s essential workers.

Home hardening and other tax breaks for Floridians – HB 7071 includes the “home hardening” initiative, a 2022 Florida Realtors’ legislative priority that provides sales tax relief to homeowners who harden their homes from storms. The bill also includes an abatement of all property taxes for owners of the condos that collapsed in Surfside, pro-rated refunds of property taxes on residential properties rendered uninhabitable by a catastrophic event for at least 30 days, a sales tax reduction on new mobile homes and several sales tax holidays

Flooding and sea level rise resilience – HB 7053 establishes the Statewide Office of Resilience within the Governor’s Office, with the governor appointing the Chief Resiliency Officer. It sets a minimum of $100 million in funding to be identified annually in a comprehensive and ranked list of resilience projects.

Private property rights – SB 518 helps property owners who wish to prune, trim and remove trees that present a danger to their property by strengthening a 2019 law passed that prohibits local governments from requiring permits for the removal of “dangerous” trees on residential property.

Water quality – HB 965 creates a public/private partnership-oriented approach to improving water quality by authorizing the creation of water quality enhancement areas – natural systems constructed, operated, managed and maintained to provide offsite regional treatment through enhancement credits.

Preventing unlicensed real estate activity – The Legislature allocated up to $500,000 in the 2022-2023 fiscal year budget (HB 5001) to combat unlicensed real estate activity.

Everglades –The 2022-2023 fiscal year budget (HB 5001) that goes into effect July 1 includes money for Everglades Restoration ($425 million), Lake Okeechobee Watershed Restoration ($450 million), springs restoration ($75 million), beaches ($50 million), Biscayne Bay ($20 million), the Wastewater Grant Program ($125 million) and the Resilient Florida Grant Program ($470 million).

Septic system inspections – SB 856 makes private inspections an option for onsite sewage treatment and disposal systems, also known as septic systems. Cities and counties have dealt with a backlog of septic inspections for years, partially because of the number of inspectors and workload. This bill allows an authorized contractor to hire a private provider to inspect the system in addition to the inspections performed by public inspectors.

Landfills – HB 1419 creates a Municipal Solid Waste-to-Energy program to address the amount of municipal solid waste created in Florida, particularly in highly populated areas that don’t have the space or ability to permit new landfills.

WASHINGTON – The Federal Housing Administration (FHA) introduced a 40-year loan modification option, and it’s asking the mortgage industry for input in a bid to expand its COVID-19 loss mitigation “waterfall.”

The proposed rule would revise repayment provisions for FHA borrowers and allow lenders to reframe a borrower’s total unpaid loan for an additional 120 months.

HUD says the goal is to prevent “several thousand borrowers a year from foreclosure.”

The change will give borrowers a more sustainable, lower monthly payment that can help bring a borrower’s mortgage current, prevent imminent re-default and help borrowers keep their homes. The rule specifically targets FHA borrowers who recently exited government-mandated forbearance but are having difficulty making mortgage payments due to COVID-19-related financial distress.

HUD said the rule would also lower losses to FHA’s Mutual Mortgage Insurance Fund as fewer properties would be sold at a loss in foreclosure or out of FHA’s real estate-owned inventory.

However, there’s also a downside to borrowers who opt for a 40-year loan modification. HUD says they’ll face slower equity accumulation and more interest payments. But it says the ability to keep their home should offset any drawbacks.