Over the past year or so, many people have talked about how tough it is to buy a home. And while there’s no arguing affordability is still tight, there are signs it’s starting to get a bit better and may improve even more throughout the year. Elijah de la Campa, Senior Economist at Redfin, says:
“We’re 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.”
Here’s the latest data on the three biggest factors that affect home affordability: mortgage rates, home prices, and wages.
Mortgage Rates
Mortgage rates have been volatile this year – bouncing around in the upper 6% to low 7% range. That’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, mortgage rates are still lower than last fall when they reached nearly 8%. On top of that, most experts still think they’ll come down some over the year. A recent article from Bright MLS explains:
“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 in rates can make a difference. When rates go down, you can more easily afford the home you want because your monthly payment would be lower.
Home Prices
The second big factor to think about is home prices. Most experts project they’ll keep going up this year but at a more normal pace. That’s because more homes are on the market this year, but still not enough for everyone who wants to buy one. The graph below shows the latest 2024 home price forecasts from seven different organizations:
These forecasts are good news for you because they mean prices aren’t likely to shoot sky-high as they did during the pandemic. That doesn’t mean they’ll fall – they’ll just rise slower.
Wages
One factor helping affordability right now is the fact that wages are rising. The graph below uses data from the Federal Reserve to show how wages have been growing over time:
Check out the blue dotted line. That shows how wages typically rise. Looking at the right side of the graph, you’ll see wages climbing even faster than normal.
Here’s how this helps you. If your income has increased, it’s easier to afford a home because you don’t have to spend as much of your paycheck on your monthly mortgage.
Bottom Line
If you add up these factors, you’ll see that mortgage rates are still projected to come down later this year, home prices are going up more moderately, and wages are growing quicker than normal. Those trends are a good sign for your ability to afford a home.
Contact KM Realty Group LLC, Chicago’s real estate agent, for more information.
