The 3 Factors Affecting Home Affordability Today
Increasing mortgage rates have created affordability challenges for today's homebuyers, which has received a lot of attention. Rates have risen dramatically since the record-low we saw during the pandemic. But home affordability is determined by more than just mortgage rates - it's also determined by home prices, wages, and mortgage rates. Home affordability today can be determined by considering how each of these factors is changing.
1. Mortgage Rates
While mortgage rates are higher than they were a year ago, they’ve hovered primarily between 6% and 7% for nearly eight months now. Mortgage rates have experienced some volatility during that time. And even a small change in mortgage rates impacts your purchasing power. In order to stay on top of the market, you should lean on your team of real estate professionals for expert advice. In the immediate future, mortgage rates are likely to remain around 6%-7%, although it's hard to predict where they'll go.
2. Home Prices
Over the past few years, home prices appreciated rapidly as the record-low mortgage rates we saw during the pandemic led to a surge in buyer demand. During a time when home supply was at record lows, the heightened buyer demand led to higher home prices. However, today’s higher mortgage rates have slowed down price appreciation and home price appreciation varies by market. Some areas are seeing slight declines while others have prices that are climbing. To find out what’s happening with prices in your local market, reach out to a trusted real estate agent.
The most positive factor in affordability right now is rising income. The higher your wages, the lower the percentage of your income you have to put toward your mortgage since you don't have to put as much toward your monthly housing costs as before. A home's affordability is determined by 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.
Knowing the key factors that impact affordability is important for making an informed decision when buying a home. To stay up to date on the latest on each, connect with a trusted real estate professional today.