There has been significant attention paid to the impact of higher mortgage rates on the current challenges faced by homebuyers in terms of affordability. While it is indeed the case that rates have risen significantly from the historic lows observed during the pandemic, it is important to note that home affordability is influenced not only by mortgage rates, but also by home prices and wages. Thus, it is crucial to examine how each of these factors is evolving in order to fully comprehend the state of home affordability presently. Here is the most up-to-date information on this topic.

  1. Although mortgage rates have increased compared to a year ago, they have remained mostly stable within the range of 6% to 7% for almost eight months now. Even a slight variation in mortgage rates can affect your buying potential. Therefore, relying on the expertise of your real estate team is crucial to stay informed about market developments. While predicting future mortgage rate trends is challenging, many professionals anticipate that they will persist at around 6% to 7% in the near term.
  2. The appreciation of home prices has been swift in recent years, driven by the historically low mortgage rates observed during the pandemic that stimulated buyer demand. The imbalance between heightened buyer demand and record-low inventory of homes for sale resulted in an upward push on home prices. However, the current higher mortgage rates have slowed down the pace of price appreciation.
  3. Rising income is currently the most promising aspect of affordability. Higher wages enhance affordability since they lower the percentage of your income needed to pay your mortgage, reducing the amount of your paycheck required for monthly housing expenses. Home affordability hinges on a combination of mortgage rates, home prices, and wages. If you have questions or desire further information, please let us know and we will be happy to discuss the housing market further with you at anytime.  

In summary, if you intend to purchase a home, understanding the critical factors that affect affordability is crucial to make an informed decision. To stay updated on each factor, please just let us know.