Three Things Affecting Home Affordability Right Now
To fully understand home affordability today, it’s important to take into account all of the changing factors. Here’s the latest information:
1. Mortgage Rates
Although mortgage rates have increased from last year, they’ve been consistently between 6% and 7% for the last eight months (as seen in the graph below).
The graph indicates that mortgage rates have been inconsistent lately, and even a slight fluctuation in rates can affect your ability to buy a property. Therefore, it is crucial to seek guidance from real estate experts and keep track of market developments. Although the future of mortgage rates is uncertain, most professionals predict they will remain at approximately 6%-7%.
2. Home Prices
In recent years, there has been a significant increase in home prices due to the low mortgage rates observed during the pandemic. As a result, there was a rise in the demand for homes, while the availability of houses for sale was limited, causing prices to go up. However, due to the current higher mortgage rates, the appreciation in prices has slowed down.
“The divergence in home price changes across the U.S. reflects a tale of two housing markets. Declines in the West are due to the tech industry slowdown and a severe lack of affordability after decades of undersupply. The consistent gains in the Southeast and South reflect strong job markets, in-migration patterns and relative affordability due to new home construction.”
If you want to get information about price trends in your area, you should contact a reliable real estate agent.
Additionally, the graph below depicts how incomes have increased over time, based on data from the Bureau of Labor Statistics (BLS), indicating that rising income is currently the biggest factor for affordability.
Higher wages improve affordability because they reduce the percentage of your income it takes to pay your mortgage since you don’t have to put as much of your paycheck toward your monthly housing cost.
Home affordability comes down to a combination of rates, prices, and wages. If you have questions or want to learn more, reach out to a real estate professional who can explain what’s happening locally and how these factors work together.
It’s important to understand the key factors that affect affordability when you’re considering purchasing a home, so that you can make an informed decision. Let’s connect today to make sure you understand what’s happening in our local housing market.