The average American falls $40,000 short of being able to buy a home—here are 3 alternative ways to get into real estate

The dream of homeownership is slipping further away for many American families thanks to a perfect storm of sky-high mortgage rates and rising home prices.

Homebuyers today need an annual income of $114,627 to afford a median-priced U.S. home, according to Redfin analysis, which is up $15,285, or 15%, from a year ago and is almost $40,000 more than what the typical household earns.

Much of the pain is felt in the monthly mortgage payments. The typical U.S. homebuyer's monthly mortgage payment has hit an all-time high of $2,866, according to Redfin, up 20% from a year earlier.

The average 30-year fixed mortgage rate passed 7.5% in November 2023, hitting its highest level since 2000 and really putting strain on borrowers' budgets and purchasing power.

"In a homebuyer's ideal world, rising mortgage rates would push demand and home prices down enough to make up for high interest payments. But that's not what's happening now," said Redfin Economics research lead Chen Zhao.

If you're determined to buy a home, there are ways to control your costs. If you would rather wait out the pricey market, Moneywise has some alternative ways to invest in real estate.

Buyers should 'think outside the box'

Homebuyers — particularly first-timers who are committed to getting a foothold on the housing ladder — "should think outside the box," according to Zhao.

"Although new listings are ticking up slightly, inventory is still near record lows as homeowners hang onto their low mortgage rates — and that's propping up prices."

He said first-time buyers might do well to consider options that are less expensive than a single-family home, such as "a condo or a townhouse." Buyers may also have to look at "moving to a more affordable part of the country, or a more affordable suburb."

The income needed to buy a home has risen in all major U.S. metropolitan areas, according to the Redfin report, with the biggest uptick occurring in Miami, and the smallest in Austin, Texas. Redfin noted the necessary income has increased least in pandemic homebuying hotspots, like Boise, Idaho, Salt Lake City, Fort Worth, Texas, and Lakeland, Florida.

Once you find a home you want to buy, you need to become a savvy shopper. When facing mortgage rates of close to 8%, it can really pay to shop around. Earlier this year, mortgage giant Freddie Mac said homebuyers can potentially save $600 to $1,200 annually by applying for mortgages from multiple lenders — worthwhile savings in today's tricky economic climate.

The same can be said for essential expenses like insurance once you've bought your home. Don't just settle for the first home insurance quote you get. Shop around and compare multiple options the best coverage and the best price for you.

If you've considered all of that and you'd still rather ride out this wave, there are other worthwhile ways to invest in real estate.

Real estate investment trusts

Investing in a real estate investment trust (REIT) is a way to profit from the real estate market without having to buy a house or take on the stress of being a landlord.

REITs are publicly traded companies that own income-producing real estate like apartment buildings, shopping centers, and office towers. They collect rent from tenants and pass that rent to shareholders in the form of regular dividend payments.

Generally, REITs are described as high-return investments that provide solid dividends and the potential for moderate, long-term capital appreciation.

Also, as REITs are publicly traded, you can buy or sell shares any time and your investment can be as little or as large as you want — unlike buying a house, which usually requires a hefty down payment followed by a mortgage.

Crowdfunding platforms

Crowdfunding refers to the practice of funding a project by raising small amounts of money from a large number of people. This can include real estate.

Through a crowdfunding platform, you can buy a percentage of physical real estate — from rental properties to commercial properties.

Some options are targeted at accredited investors and can have higher minimum investments that can reach tens of thousands of dollars.

If you're not an accredited investor, there are multiple platforms that allow you to invest small sums, even as low as $100. You can even buy a stake in digital real estate.

Sponsors of crowdfunded real estate deals usually charge fees to investors — typically in the range of 0.5% to 2.5% of whatever you've invested. These platforms make real estate investing more accessible to the general public by simplifying the process and lowering the barrier to entry.

This story was produced by Moneywise and reviewed and distributed by Stacker Media.