There are three things that factor into how affordable a home is:
the price of the home, the mortgage rate, and people’s wages.
The number one thing people are talking about when it comes to buying a home is the mortgage rate. The current rates are almost four percentage points higher than they were at the beginning of this year.
1. Mortgage Rates
People are focused on mortgage rates when they talk about homebuying conditions today. The rates are almost four full percentage points higher than at the beginning of the year.
That increase in mortgage rates is making it harder for people to buy homes, because it costs more to finance a purchase.
2. Home Prices
The second factor at play is home prices. Home prices have been in the news lately because they increased a lot during the pandemic. Now, they have started to go down a little bit, but they are still high compared to before.
The reason home prices are slowing down is because mortgage rates are increasing and this is making it harder for people to buy homes. However, it is important to remember that home prices are still higher than they were before the pandemic. In most markets, prices are going up but there are some areas where they are starting to decline. It all depends on your local market. If you want to know what is happening in your area, you should talk to a trusted real estate professional.
3. Wages
The one big, positive component in the affordability equation is the increase in American wages. The graph below uses data from the Bureau of Labor Statistics (BLS) to show how wages have grown over time. This year is no exception.
“Median weekly earnings of the nation’s 120.2 million full-time wage and salary workers were $1,070 in the third quarter of 2022 (not seasonally adjusted), the U.S. Bureau of Labor Statistics reported…This was 6.9 percent higher than a year earlier…”
When we consider affordability, we need to keep in mind home prices and wages need to be factored in as well. Because wages been rising, they’re a big reason why serious buyers are still purchasing homes this year.
Buying and Selling Real Estate involves a series of factors, not just one of them. It is important to look and analyze the whole picture with someone that really knows the local market and can provide the complete information
To learn more, let’s connect today and make sure you have a trusted lender so you’re able to make an informed decision if you’re planning to buy or sell a home right now.
