Over the past year, a lot of people have been talking about housing affordability and how tight it’s gotten. But just recently, there’s been a little bit of relief on that front. Mortgage rates have gone down since their most recent peak in October. But there’s more to being able to afford a home than just mortgage rates.
To really understand home affordability, you need to look at the combination of three important factors: mortgage rates, home prices, and wages. Let’s dive into the latest data on each one to see why affordability is improving.
Mortgage rates have come down in recent months. And looking forward, most experts expect them to decline further over the course of the year. Jiayi Xu, an economist at Realtor.com, explains:
“While there could be some fluctuations in the path forward … the general expectation is that mortgage rates will continue to trend downward, as long as the economy continues to see progress on inflation.”
And even a small change in mortgage rates can have a big impact on your purchasing power, making it easier for you to afford the home you want by reducing your monthly mortgage payment.
The second important factor is home prices. After going up at a relatively normal pace last year, they’re expected to continue rising moderately in 2024. That’s because even with inventory projected to grow slightly this year, there still aren’t enough homes for sale for all the people who want to buy them. According to Lisa Sturtevant, Chief Economist at Bright MLS:
“More inventory will be generally offset by more buyers in the market. As a result, it is expected that, overall, the median home price in the U.S. will grow modestly . . .”
That’s great news for you because it means prices aren’t likely to skyrocket like they did during the pandemic. But it also means it’ll probably cost you more to wait. So, if you’re ready, willing, and able to buy, and you can find the right home, purchasing before more buyers enter the market and prices rise further might be in your best interest.
Another positive factor in affordability right now is rising income. The graph below uses data from the Federal Reserve to show how wages have grown over time:
If you look at the blue dotted trendline, you can see the rate at which wages typically rise. But on the right side of the graph, wages are above the trend line today, meaning they’re going up at a higher rate than normal.
Higher wages improve affordability because they reduce the percentage of your income it takes to pay your mortgage. That’s because you don’t have to put as much of your paycheck toward your monthly housing cost.
Home affordability depends on three things: mortgage rates, home prices, and wages. The good news is, they’re moving in a positive direction for buyers overall.
If you're thinking about buying a home, it's important to know the main factors impacting affordability are improving. To get the latest updates on each, let's connect.
senior living, senior relocation, keeping fit after 50, aging in place, living alone,
August 28, 2024
your joints are unhappy and you're living alone...
August 27, 2024
...And it seems like only yesterday.
February 26, 2024
If you’re planning to buy your first home, saving up for all the costs involved can feel daunting, especially when it comes to the down payment. That might be because … Read more
February 23, 2024
With interest rates on the rise, potential home buyers are wondering if this is a good time to buy.
February 22, 2024
Over the past few months, experts have revised their 2024 home price forecasts based on the latest data and market signals, and they’re even more confident prices will… Read more
February 21, 2024
There’s a lot of confusion in the market about what’s happening with day-to-day movement in mortgage rates right now, but here’s what you really need to know: compared… Read more
February 20, 2024
Buying your first home is a big, exciting step and a major milestone that has the power to improve your life. As a first-time homebuyer, it's a dream you can make come… Read more
February 20, 2024
If you're thinking of selling your house this spring, now is the perfect time to start getting it ready. With the market gearing up for its busiest time of year, it'll… Read more
February 16, 2024
If you're trying to buy a home but are having a hard time finding something in your budget, consider condos and townhomes.
Lori’s reputation for exceptional service, discretion, and uncompromising integrity is at the heart of every transaction. With experience cultivated from almost 20 years of real estate transactions, both as an agent and investor, Lori brings her passion, market knowledge, and unmatched work ethic to each transaction.