First Time Home BuyersMilitary May 16, 2023

Housing Affordability Factors

Housing affordability factor for everyone is one of the most urgent social problems. We all know that the housing market is dynamic. And we are aware of the difficulties today’s buyers are having. Although rates do have an effect on this, it’s important to keep in mind that there are other factors to consider. But what are these housing affordability factors? Let’s find out on the latest data below.

1. Mortgage Rates

Mortgage rates are at the top of the list. When discussing current home buying conditions, this is the aspect the most emphasized. It is apparent that rates have increased from a year ago. As of now, it is almost 4 full percentage points higher. And according to Len Kiefer, Deputy Chief Economist of Freddie Mac, that represents the largest year-to-date rate increase in more than 50 years.

The cost of financing a home purchase is rising as a result of the increase in mortgage rates. As a result, it is now difficult for many buyers and driving some out of the market.

Mortgage Rates Hover Between 6% - 7%

The graph demonstrates that there is fluctuation in mortgage rates during that time. It influences your ability to make even minor changes in mortgage rates. For this reason, having a local expert on your side can help you stay current with changes in the market.

2. Home Prices

The second factor is home prices. Housing affordability correlates with the level of housing prices. According to the S & P Case-Shiller Home Price Index, home values have now been declining for five months in a row. The fact that home prices are still significantly higher than they were prior to the pandemic is noteworthy. Even now, there is still a long way to go before home price appreciation returns to more typical levels. Historically, this has been closer to 4%. However, even though prices are still high in most markets, some regions are experiencing slight drops.

S&P Case-Shiller Index Continued To Decelerate in August

3. Wages

Finally, the upward trend in wages is the only positive factor in affordability. Using data from the Bureau of Labor Statistics (BLS):

“Median weekly earnings of the nation’s 120.2 million full-time wage and salary workers were $1,070 in the third quarter of 2022 (not seasonally adjusted), the U.S. Bureau of Labor Statistics reported…This was 6.9 percent higher than a year earlier…”

American Wage Growth Since 2000

Firstly, a higher wage would make housing more affordable. Second is it will decrease the number of people using public assistance. And lastly, it will boost state and local tax collections.

The Bottom Line

This study suggests that the following have a direct impact on housing affordability: mortgage rates, home prices, and wages. Therefore, keep in mind that the full picture encompasses more than just mortgage rates. Additionally, consider wages and home prices. Wages are a significant factor in why serious buyers are still buying homes this year. You can always get in touch with your local expert if you want to stay current on the most recent trends and changes.

What To Do:

Did you find this read interesting? Need expert and white glove advice? Get in touch with Steve Freeman for local and professional real estate advice in your neighborhood. Look for your dream property HERE!