The Three Factors Affecting Home Affordability Today

 

There’s been a lot of focus on higher mortgage rates and how they’re creating affordability challenges for today’s homebuyers. It’s true that rates climbed dramatically since the record-low we saw during the pandemic. But home affordability is based on more than just mortgage rates – it’s determined by a combination of mortgage rates, home prices, and wages.

Considering how each one of these factors is changing gives you the full picture of home affordability today. Here’s the latest.

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 with some volatility during that time. And even a small change in mortgage rates impacts your purchasing power.

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. However, today’s higher mortgage rates have slowed down price appreciation. And, the truth is, home price appreciation varies by market. Some areas are seeing slight declines while others have prices that are climbing.

Wages: Wages are rising. Higher wages improve affordability because they reduce the percentage of your income it takes to pay your mortgage since you don’t have to put as much of your paycheck toward your monthly housing cost.

If you’re planning to buy a home, knowing the key factors that impact affordability is important so you can make an informed decision. To stay up to date on the latest on each, DM me today.

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