Three Biggest Impacts on Home Affordability

In the last year, the topic of housing affordability has been a major point of discussion, with many noting its increasing difficulty. However, there has been some recent easing in this area. A key factor in this change is the reduction in mortgage rates since their peak in October. But, understanding home affordability goes beyond just looking at mortgage rates.

To fully grasp the concept of home affordability, it’s essential to consider a trio of critical elements: mortgage rates, home prices, and wages. Here’s an in-depth look at the latest trends in each of these areas, shedding light on why affordability is on the upswing.

Mortgage Rates

Recently, there’s been a noticeable decrease in mortgage rates. Experts predict a continued downward trend throughout the year. Jiayi Xu, an economist at Realtor.com, states:

“While there could be some fluctuations in the path forward … the general expectation is that mortgage rates will continue to trend downward, as long as the economy continues to see progress on inflation.”

Even minor shifts in mortgage rates can significantly affect your buying power, potentially lowering your monthly mortgage payments and making it easier to afford your desired home.

Home Prices

The second key factor is the trajectory of home prices. Last year, prices increased at a standard rate and are expected to rise moderately in 2024. This is partly due to a slight increase in housing inventory, which still falls short of meeting buyer demand. Lisa Sturtevant, Chief Economist at Bright MLS, comments:

“More inventory will be generally offset by more buyers in the market. As a result, it is expected that, overall, the median home price in the U.S. will grow modestly . . .”

This trend is beneficial as it suggests prices won’t surge as they did during the pandemic. However, delaying a purchase could mean facing higher costs later. Therefore, if you’re prepared and able to buy, and you find the right home, acting before more buyers enter the market and prices climb might be advantageous.

Wages

The third encouraging factor is the rise in incomes. The following graph, based on Federal Reserve data, illustrates the growth in wages over time:

The blue dotted line indicates the typical wage growth rate. However, current wages exceed this trend, indicating an above-average increase.

Higher wages enhance affordability by reducing the proportion of your income needed for mortgage payments, allowing more of your earnings to be allocated elsewhere.

What This Means for You

Home affordability is influenced by a combination of mortgage rates, home prices, and wages. Fortunately, these factors are currently aligning favorably for buyers.

Bottom Line

For those considering a home purchase, it’s crucial to understand that the primary factors affecting affordability are showing positive developments. Stay informed on these trends to make well-informed decisions. Connect with the local market experts at Countryside Homes NJ and RE/MAX Select for the latest market trends and insights.

Client Testimonials for Countryside Homes NJ

At Countryside Homes NJ and RE/MAX Select, we pride ourselves on delivering exceptional service to our clients. But don’t just take our word for it—read what our satisfied customers have to say. From first-time homebuyers to seasoned real estate investors and new home builders, our clients appreciate our dedication, expertise, and commitment to their success. Here are some of their stories.

David R. New Homeowner

Collaborating with Keith LaBrunda and Heather Montalbano from Countryside Homes NJ and RE/MAX Select streamlined the home-buying process for me. They were attentive to my needs and preferences, ensuring they understood exactly what I was seeking in a home and what was within my financial comfort zone. Keith and Heather provided invaluable assistance during the offer stage, sharing insightful details that enabled me to place a successful bid on my desired property. They recommended associates to assist me with securing a mortgage, conducting home inspections, and acquiring homeowner's insurance. Post-purchase, they continued to be a resource, suggesting local companies to contact for internet, water, waste management, oil, and other essential services. The experience of purchasing a home with Keith LaBrunda and Heather Montalbano was seamless and enjoyable.

Rachel and Andre First Time Homebuyer

As first-time homebuyers, the process of finding and purchasing a home felt daunting. But from the moment we reached out to Heather and Keith at Countryside Homes NJ and RE/MAX Select, our worries were put to rest. Their team was incredibly patient, answering all our questions and guiding us through every step. They took the time to understand our needs and preferences, ensuring that we found the perfect home in a neighborhood we love. We were especially impressed by their vast knowledge of the local market and their commitment to ensuring we got the best deal possible. We can't thank them enough for making our dream of homeownership a reality. If you're in the market for a new home, we highly recommend Heather and Keith at Countryside Homes NJ and RE/MAX Select. They truly go above and beyond for their clients!

Prestia Family New Homeowners

From the moment we began our home search, Heather at Countryside Homes NJ and RE/MAX Select stood out as the epitome of professionalism and dedication. Her team's in-depth knowledge of the Rockaway Borough area and their unwavering commitment to our needs made our home buying journey not only smooth but truly enjoyable. As new homeowners in Rockaway Borough, NJ, we can confidently say that choosing Heather at Countryside Homes NJ and RE/MAX Select was the best decision we made. Her expertise, patience, and genuine care for our family's needs transformed what could have been a stressful process into a memorable and joyous occasion. We are beyond grateful for her support and would highly recommend her and her team to anyone looking to find their dream home. Thank you for turning our dreams into reality!