The issue of rising mortgage rates and how they affect today’s homebuyers’ capacity to make payments has received a lot of attention. It is true that interest rates have increased significantly from the all-time low reached during the epidemic. But the affordability of a home is influenced by more than just mortgage rates; it also depends on home prices and wages.
You may get a complete picture of today’s house affordability by considering how each of these aspects is evolving. Here is the most recent.
1. Rates of mortgages
Despite being higher than they were a year ago, mortgage rates have been primarily fluctuating between 6% and 7% for the past nearly eight months (see graph below):
The graph demonstrates that there has been some fluctuation in mortgage rates over that time. Even minor changes in mortgage rates impact your ability to make purchases. To keep informed about what’s going on in the market, it’s crucial to rely on your team of real estate experts for advice. Although it’s difficult to predict where mortgage rates will go from here, most experts concur that they’ll probably stay between 6% and 7% for the foreseeable future.
2. Home Costs
The record-low mortgage rates we had during the epidemic caused a spike in buyer demand, which resulted in a dramatic increase in property prices during the past few years. Due to the imbalance between the increased buyer demand and the historically low supply of available properties for sale, housing prices rose. However, the rate of price growth has slowed due to the higher mortgage rates of today.
Additionally, home price growth varies by market. While prices are rising in some areas, they are slightly declining in others. According to Selma Hepp, Chief Economist of CoreLogic:
“The divergence in home price changes across the U.S. reflects a tale of two housing markets. Declines in the West are due to the tech industry slowdown and a severe lack of affordability after decades of undersupply. The consistent gains in the Southeast and South reflect strong job markets, in-migration patterns, and relative affordability due to new home construction.”
Contact a reputable real estate agent to learn more about the pricing trends in your neighborhood.
Rising income is now the aspect of affordability that is most favorable. The graph below illustrates how salaries have increased over time using information from the Bureau of Labour Statistics (BLS):
Greater earnings increase affordability since you can pay your mortgage with a smaller proportion of your income because you don’t have to contribute as much of your income to housing expenses each month.
Rates, prices, and incomes are what determine how affordable a home is. Reach out to a real estate expert who can explain what’s going on locally and how these factors interact if you have any questions or want to learn more.
To sum up
Knowing the major variables that affect affordability is crucial if you’re intending to purchase a property so that you can make an informed choice. Contact a dependable real estate expert immediately to be informed on the most recent developments in each.