Over the past year or so, a lot of people have been talking about how tough it is tobuy a home. And while theres no arguing affordability is still tight, there are signs its starting to get a bit better and may improve even more throughout the year. Elijah de la Campa, Senior Economist atRedfin,says:
Were slowly climbing our way out of an affordability hole, but we have a long way to go.Rates have come down from their peak and are expected to fall again by the end of the year, which should make homebuying a little more affordable and incentivize buyers to come off the sidelines.
Heres a look at the latest data for the three biggest factors that affect home affordability:mortgage rates,home prices, and wages.
1. Mortgage Rates
Mortgage rates have been volatile this year bouncing around in the upper 6% to low 7% range. Thats still quite a bit higher than where they were a couple of years ago. But there is a sliver of good news.
Despite the recent volatility, rates are still lower than they were last fall when they reachednearly 8%. On top of that, most experts still think theyll come down some over the course of the year. A recent article fromBright MLSexplains:
Expect rates to come down in the second half of 2024 but remain above 6% this year.Even a modest drop in rates will bring both more buyers and more sellers into the market.
Any drop inratescan make a difference for you. When rates go down, you can afford the home you really want more easily because your monthly payment would be lower.
2. Home Prices
The second bigfactorto think about ishome prices. Mostexperts projecttheyll keepgoing upthis year, but at a more normal pace. Thats because there aremore homeson the market this year, but still not enough for everyone who wants to buy one. The graph below shows thelatest2024 home priceforecastsfrom seven differentorganizations:
These forecasts are actually good news for you because it means the prices arent likely to shoot up sky high like they did during the pandemic. That doesnt mean theyre going to fall theyll just rise at a slower pace.
3. Wages
One factor helping affordability right now is the fact that wages are rising. The graph below usesdatafrom theFederal Reserveto show how wages have been growing over time:
Check out the blue dotted line. That shows how wages typically rise. If you look at the right side of the graph, youll see wages are climbing even faster than normal right now.
Heres how this helps you. If your income has increased, its easier to afford a home because you dont have to spend as big of a percentage of your paycheck on your monthly mortgage payment.
Bottom Line
If you stack these factors up, youll see mortgage rates are still projected to come down a bit later this year, home prices are going up at a more moderate pace, and wages are growing quicker than normal. Those trends are a good sign for your ability to afford a home.
Source:https://www.keepingcurrentmatters.com/2024/04/18/is-it-getting-more-affordable-to-buy-a-home/
