Can I Afford to Buy a Home?
A lot of Buyers are freaking out and feeling like they can’t afford to buy a new home. Well, if you have been following the real estate market recently, I’m sure you’re well-aware of the shifts we’ve seen this year. For months, even years, the market has tilted more favorably for sellers. There have been high home prices, a lack of inventory, and multiple offer scenarios almost across the board.
Key Factors Affecting Home Affordability
Today, three factors are used to gauge home affordability: Home price, current mortgage rates, and wages. So, let’s look at all three to see what challenges buyers might face in today’s market.
The fluctuation in mortgage rates is what buyers seem to be most focused on today. So, how will rising interest rates determine what a buyer can afford? Currently, rates are almost four percentage points higher than at the beginning of quarter one of 2022. According to Len Kiefer, Deputy Chief Economist at Freddie Mac, “The 30-year fixed mortgage rate has increased 3.83 percentage points since the end of last year. That’s the biggest year-to-date increase in rates in over 50 years.” Because of these rate hikes impacting how much it costs to finance a home, that may be pricing buyers out of the market.
Another factor that drastically affects homebuyer affordability is current home prices. Although home prices have come down in recent months, they are still much higher than they were “pre-pandemic.” So, if you combine the higher-than-usual home prices and mortgage rate spikes, this can make affordability a challenge for some buyers.
The good news: wages have grown over time, so more buyers are taking home more money. This will help balance out the affordability with the higher mortgage rates and home prices, and allow serious buyers to continue buying homes.
Contact Us Today For More Information
Buying a home involves many variables, so it is always best to have a trusted real estate agent with enough experience and knowledge to navigate you from start to finish. Feel free to reach out to my team and I so we can help you make the most informed decisions on affordability with your home search.