The three factors that affect home affordability today
The focus has been on the rising mortgage rates and their impact on affordability for homebuyers today. It is true that rates have risen dramatically since the lows we saw during the pandemic. Home affordability is determined by more than just mortgage interest rates. It’s a combination of mortgage interest rates, home prices and wages. Here’s the most recent. Mortgage Rates While mortgage rates are higher today than they were last year, they have been primarily hovering between 6% and 7 % for the past eight months (see graph below). Even a small change in the mortgage rate can affect your purchasing power. It’s important to rely on your real estate team for expert advice in order to stay on top of the market. It’s difficult to predict where mortgage rates will be in the future, but many experts agree that they’ll probably remain between 6% and 7% for the foreseeable future. Home PricesOver the last few years, home values have risen rapidly due to the low mortgage rates that we saw during the pandemic. This led to an increase in buyer demand. Home PricesAs the demand for homes was high, and the supply was low, this imbalance pushed up home prices. The higher mortgage rates of today have slowed price appreciation. Some areas are experiencing slight declines, while others are experiencing rising prices. Selma Hepp explains, “The divergence of home price changes in the U.S. is a tale about two housing markets.” The declines in the West are a result of the tech industry slowdown, and a severe shortage of affordability following decades of undersupply. The consistent gains in the Southeast reflect strong job markets, migration patterns, and relative affordability because of new home construction. Rising income is the most important factor for affordability at this time. Home affordability is a combination of wages, rates, and prices. Contact a real estate agent to find out what’s going on locally and how all these factors interact. Connect with a trusted professional in real estate to stay informed on the latest developments.
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