Is It Getting More Affordable To Buy a Home?
Over the past year, many have talked about how tough it is to buy a home. While affordability is still tight, signs suggest it’s improving and may continue to do so this year. As 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 a look at the latest data for the three biggest factors that affect home affordability: mortgage rates, home prices, and wages.
1. Mortgage Rates
Mortgage rates have been volatile this year, ranging from upper 6% to low 7%. That’s still higher than a few years ago, but lower than last fall when rates neared 8%. Experts expect rates to decline slightly over the year. As Bright MLS notes:
“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.”
Lower rates can help you afford the home you want because your monthly payment decreases.
2. Home Prices
Most experts project home prices will continue rising this year, but at a more moderate pace due to increasing inventory. Here are the latest 2024 forecasts from seven organizations:
Moderate growth means prices aren’t expected to skyrocket like during the pandemic, though they are unlikely to fall.
3. Wages
Wages are rising faster than normal, improving affordability. The graph below from the Federal Reserve shows wage growth over time:
As incomes increase, it takes a smaller percentage of your paycheck to cover mortgage payments, making homes more affordable.
Bottom Line
Mortgage rates are projected to drop slightly later this year, home prices are rising moderately, and wages are climbing faster than usual. These trends signal improving home affordability. If you’re ready to explore your options, let’s talk.
