Over the past couple of years, a lot of people have had a hard time buying a home. And while affordability is still tight, there are signs it’s getting a little better and might keep improving throughout the rest of the year. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:
“Housing affordability is improving ever so modestly, but it is moving in the right direction.”
Three biggest factors affecting home affordability:
1. Mortgage Rates
Mortgage rates have been volatile this year, bouncing around from the mid-6% to low 7% range. But there’s some good news. Data from Freddie Mac shows rates have been trending down overall since May.
Mortgage rates have improved lately in part because of recent economic, employment, and inflation data. Moving forward, some rate volatility is to be expected. But if future economic data continues to show signs of cooling, experts say mortgage rates could keep going down.
Even a small drop can help you out. When rates decline, it’s easier to afford the home you want because your monthly payment will be lower. Just don’t expect them to go back down to 3%.
2. Home Prices-The second big thing to think about is home prices. Nationally, they’re still going up this year, but not as fast as they did a couple of years ago.
If you’re thinking about buying a home, slower price growth is good news. Home prices went up a lot during the pandemic, making it hard for many people to buy. Now, with prices rising more slowly, buying a home may feel less out of reach.
3. Wages-Another factor helping with affordability is rising wages. Wages are rising even faster than normal right now.
This helps you because if your income increases, it’s easier to afford a home. That’s because you won’t have to spend as much of your paycheck on your monthly mortgage payment.
Bottom Line
Though affordability is still a challenge, these trends are early signs things might be starting to improve.
