front porch ā€¢ Uncategorized ā€¢ April 23, 2024

Is It Getting More Affordable To Buy a Home?

Over the past year or so, a lot of people have been talking about how tough it is toĀ buy a home. And while thereā€™s no arguing affordability is still tight, there are signs itā€™s starting to get a bit better and may improve even more throughout the year. Elijah de la Campa, Senior Economist atĀ Redfin,Ā says:

ā€œWeā€™re slowly climbing our way out of an affordability hole, but we have a long way to go.Ā 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.ā€

Hereā€™s a look at the latest data for the three biggest factors that affect home affordability:Ā mortgage rates,Ā home prices, and wages.

1. Mortgage Rates

Mortgage rates have been volatile this year ā€“ bouncing around in the upper 6% to low 7% range. Thatā€™s 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 reachedĀ nearly 8%. On top of that, most experts still think theyā€™ll come down some over the course of the year. A recent article fromĀ Bright MLSĀ explains:

ā€œExpect rates to come down in the second half of 2024 but remain above 6% this year.Ā Even a modest drop in rates will bring both more buyers and more sellers into the market.ā€Ā 

Any drop inĀ ratesĀ can 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 bigĀ factorĀ to think about isĀ home prices. MostĀ experts projectĀ theyā€™ll keepĀ going upĀ this year, but at a more normal pace. Thatā€™s because there areĀ more homesĀ on the market this year, but still not enough for everyone who wants to buy one. The graph below shows theĀ latestĀ 2024 home priceĀ forecastsĀ from seven differentĀ organizations:

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These forecasts are actually good news for you because it means the prices arenā€™t likely to shoot up sky high like they did during the pandemic. That doesnā€™t mean theyā€™re going to fall ā€“ theyā€™ll just rise at a slower pace.

3. Wages

One factor helping affordability right now is the fact that wages are rising. The graph below usesĀ dataĀ from theĀ Federal ReserveĀ to show how wages have been growing over time:

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Check out the blue dotted line. That shows how wages typically rise. If you look at the right side of the graph, youā€™ll see wages are climbing even faster than normal right now.

Hereā€™s how this helps you. If your income has increased, itā€™s easier to afford a home because you donā€™t have to spend as big of a percentage of your paycheck on your monthly mortgage payment.

Bottom Line

If you stack these factors up, youā€™ll 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.