3 Key Factors Affecting Home Affordability

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 RatesMortgage 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 PricesThe 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. WagesAnother 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 YouHome 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 LineIf 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.

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Today’s Housing Market Has Only Half the Usual Inventory [INFOGRAPHIC]

Some HighlightsThere are only about half the number of homes for sale compared to the last normal years in the market. That means buyers don’t have enough options right now. So, if you work with an agent to list your house, it should be in the spotlight. If you're thinking of selling, get in touch with a local real estate agent so your house can stand out while there’s such a shortage of supply and buyers are craving more options.

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More Jobs and Better Pay Leads to More Buyer Demand

There’s been talk about a recession for quite a while now. But the economy has been remarkably resilient. Why? One reason is employment and wages have stayed strong. Let’s look at the latest information on each one and why both are good news if you’re thinking about selling your house.More Jobs Are Being CreatedInstead of facing the job losses typical of any recession, the economy has been growing and adding jobs. According to the Bureau of Labor Statistics (BLS), 187,000 jobs were created in July, which is up from the 185,000 created in June. That means more people are finding work. In fact, so many jobs are being added that the unemployment rate is far lower than the long-term average of 5.7% (see graph below):A low unemployment rate means that most people who want to work are finding jobs. When people have jobs, they have steady incomes – and that can help set them up to consider homeownership.People Are Making More MoneyAnd data also shows hourly earnings have been going up pretty steadily over the past few years (see graph below):When wages rise, people have more money that they could save or use toward buying a home. This increase in income helps offset some of the affordability challenges in the housing market today. Affordability depends on three main factors: wages, home prices, and mortgage rates. With higher home prices and mortgage rates right now, Builder Online summarizes how growing wages can help:“The housing market has been a beneficiary of the strong economy and labor market. Many of those employed have saved money over the past few years and used those funds toward a down payment on a home.”If you’re thinking about selling your house, a strong job market, growing wages, and the resulting buyer demand is fantastic news. It means there’s a larger pool of potential buyers out there who are in a position to pursue their dreams of homeownership.Bottom LineWith more jobs and rising wages creating eager buyers, there’s a lot going in your favor. Reach out to a local real estate agent so you have someone who can guide you through the process of selling your house, from setting the right price to getting your home ready to show.

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