The 3 Factors That Affect Home Affordability
If you're like many people, you've probably been keeping an eye on the housing market and noticed that it's becoming increasingly difficult for many people to afford a home. However, experts are saying that this may change in 2023. Selma Hepp, an expert at CoreLogic, believes that the housing market may be more resilient this year due to a combination of improving affordability and a more positive economic outlook.
Three key factors that determine housing affordability are home prices, mortgage rates, and wages. As home prices, mortgage rates, and wages all improve, it should become more affordable for people to buy a home. So, if you're thinking of buying a home in the near future, it's worth keeping an eye on these three factors as they could make a big difference in how affordable it is for you.
1. Mortgage Rates
When you're ready to buy a home, pre-approval is an essential step that will help to make your offer stand out to sellers. It shows that you are a serious and financially stable buyer, which can give you a competitive edge in the market. Not only that, but pre-approval can also give you a better idea of how much home you can afford and help you to focus your search on properties that are within your budget. This can save you a lot of time and energy in the long run. Additionally, getting pre-approved can give you peace of mind, knowing that when you find your dream home, you'll be able to make an offer with confidence, knowing that you have been pre-approved and that you are more likely to close the deal.
2. Home Prices
According to Lawrence Yun, Chief Economist at NAR, home prices are expected to remain stable nationally in 2023 with some markets experiencing small gains and others slight declines. The exact impact on prices will vary by local area. For a more accurate picture of your specific market and its effect on affordability, it's best to consult a real estate professional.
3. Wages
The final component in the affordability equation is wages. The graph below uses data from the Bureau of Labor Statistics (BLS) to show how wages have increased over time:
When it comes to buying a home, it's not just about the cost of the mortgage and the house itself. It's important to take into account your income and wages, too. Good news for homebuyers - with wages on the rise, the market has opened up more opportunities for you.
Though affordability won't be a non-issue this year, the outlook for 2023 is looking better. With mortgage rates expected to drop and home price growth slowing down, it's a relief for those who have struggled to keep up with the market in recent years. In the words of Mike Fratantoni, the Chief Economist at the Mortgage Bankers Association (MBA), "We're looking at a brighter future for homebuyers. Lower rates and slowing home price growth will help ease affordability challenges."
Bottom Line
Take control of your homeownership dreams today! Connect with me for any questions and ensure a smooth home buying journey by working with a trusted lender. Your path to homeownership starts now - find out how close you are to making it a reality!
