If you’ve been keeping tabs on the housing market in recent years, you’ve likely heard about the increasing affordability issues. However, experts predict that the key factors that influence housing affordability are likely to improve in the coming year. This could be a welcome relief for those who have been struggling to find an affordable home.
The three key metrics used to determine home affordability are home prices, mortgage rates, and wages. Let’s take a closer look at each one. Home prices are a major factor in determining affordability, as they can vary significantly from one area to another. Mortgage rates are also important, as they can affect the amount of money a buyer needs to borrow and the amount of interest they will pay over the life of the loan. Finally, wages play a role in determining affordability, as they can affect the amount of money a buyer has available for a down payment and monthly payments. By understanding how these three factors interact, buyers can make informed decisions about their home purchase.
1. Mortgage Rates
Mortgage rates skyrocketed to over 7% last year, causing many prospective buyers to put their plans on hold. However, the tides have shifted and rates are beginning to decline, offering a glimmer of hope for those looking to purchase a home.
Even a slight alteration in rates can have a significant effect on your buying power. This can be especially true when it comes to large purchases, such as a car or a house, where even a minor change in rates can make a big difference in the amount of money you have to spend. By understanding how rates can affect your purchasing power, you can make more informed decisions when it comes to making major purchases.
2. Home Prices
The second factor influencing the market is home prices. Home prices have been making headlines in recent years due to their dramatic surge during the pandemic. This surge has been unprecedented, with prices reaching record highs and creating a seller’s market. As a result, buyers have had to be more creative and competitive in order to secure their dream homes.
While prices may remain stagnant in some markets this year, others could experience slight increases or decreases. It all depends on the local area. To gain insight into what is happening in your market and how prices are affecting affordability, it is best to consult a reliable real estate professional.
When considering affordability, it is important to take into account more than just mortgage rates and prices. Wages must also be taken into account, as they have been steadily increasing, providing potential buyers with renewed opportunities in the market.
While affordability hurdles are not likely to disappear this year, current trends and projections suggest that 2023 should bring some respite to homebuyers who have been confronted with increasing difficulties.
If you have any questions, don’t hesitate to get in touch with Diane. It’s also important to ensure that you have a reliable lender so you can investigate your financing options. You may be closer to owning your dream home than you realize!