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.
1. Mortgage Rates
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.
2. Home Prices
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.
3. Wages
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.
What This Means for You
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.
Bottom Line
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, connect with a trusted real estate agent.
Aaron Boone is a seasoned professional in the real estate industry, bringing a wealth of experience and a genuine commitment to helping individuals and families find their ideal homes. With a career that began in 2007, Aaron has established himself as a reliable and knowledgeable expert in the field, specializing in assisting people with relocation needs and seniors looking to downsize.
As a long-time resident of the community for over 30 years, Aaron possesses a deep understanding of the local market dynamics and trends. His educational background is equally impressive, holding degrees in education, human resources, and business management. This diverse foundation allows him to approach real estate with a comprehensive and well-rounded perspective.
Aaron’s professional journey has seen him excel in various facets of the real estate realm, including property management, marketing, technology solutions, accounting, and finance. His extensive skill set enables him to guide clients through the intricacies of buying or selling a home with confidence and efficiency.
What sets Aaron apart is his unwavering commitment to going above and beyond for his clients. He is known for being a compassionate and attentive advocate, offering support at every step of the real estate process. His approach is characterized by a unique blend of knowledge, care, and active listening.
Notably, Aaron is upfront and straightforward in his communication style. He believes in telling clients what they need to hear, not just what they want to hear, fostering a relationship built on trust and transparency. His ability to think outside the box allows him to find creative solutions to challenges that others might overlook.
In addition to his professional achievements, Aaron brings a folksy, down-to-earth approach to his work, making the journey to finding a dream home both enjoyable and stress-free. Whether it’s through his deep community roots, extensive expertise, or his genuine care for clients, Aaron Boone stands out as a dedicated and effective real estate professional.