Is Affordability Starting To Improve?

<article class="post-1155902 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-1155902"><span class="entry-date">August 13, 2024</span><div class="entry-header center-block text-center"><h1 class="entry-title">Is Affordability Starting To Improve?</h1><div class="shareBlock"><div class="shareTitle">Share</div><div class="shareIcons"><a aria-label="Twitter Share Link" class="twitter solid display-inline-block" data-tracking="Post,Social Post Link Clicked,Twitter" href="http://twitter.com/share?text=Is+Affordability+Starting+To+Improve%3F&amp;url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fis-affordability-starting-to-improve%2F" target="_blank"><span class="force-hidden">Twitter</span></a>
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</div></div><div class="post-tax post-category"><span></span><a href="../category/realtor-blog/index.html" rel="tag">Realtor Blog</a></div><div class="post-tax post-post_tag"></div></div><div class="entry-content"><div><img alt="Is Affordability Starting To Improve? Simplifying The Market" decoding="async" loading="lazy" src="https://media.agentaprd.com/sites/222/20240813-is-affordability-starting-to-improve-original.webp" style="display: block; margin-bottom: 5px; clear: both; max-width: 100%;" width=""/>
<p>Over the past couple of years, a lot of people have had a hard time <a href="https://www.simplifyingthemarket.com/2024/07/19/the-biggest-mistakes-homebuyers-are-making-right-now/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: blue;" target="_blank">buying a home</a>. And while affordability is still tight, there are signs it’s getting a little better and might keep improving throughout the rest of the year. Lawrence Yun, Chief Economist at the <em>National Association of Realtors</em> (NAR), <a href="https://www.cnbc.com/2024/07/30/here-are-the-signs-of-an-improving-housing-market.html" rel="noopener noreferrer" style="color: blue;" target="_blank">says</a>:</p>
<blockquote><p><em>“Housing affordability is improving ever so modestly, but it is moving in the right direction.”</em></p></blockquote>
<p>Here’s a look at the latest data on the three biggest factors affecting home affordability: <a href="https://www.simplifyingthemarket.com/2024/07/25/how-the-economy-impacts-mortgage-rates/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: blue;" target="_blank">mortgage rates</a>, <a href="https://www.simplifyingthemarket.com/2024/07/29/are-home-prices-going-to-come-down/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: blue;" target="_blank">home prices</a>, and wages. </p>
<h4><strong>1. Mortgage Rates</strong></h4>
<p><a href="https://www.simplifyingthemarket.com/2024/08/07/mortgage-rates-down-a-full-percent-from-recent-high/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: blue;" target="_blank">Mortgage rates</a> have been volatile this year, bouncing around from the mid-6% to low 7% range. But there’s some good news. Data from <em>Freddie Mac</em> shows rates have been <a href="https://www.freddiemac.com/pmms/archive" rel="noopener noreferrer" style="color: blue;" target="_blank">trending down</a> overall since May (<em>see graph below</em>):</p>
<p><a href="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240812/20240813-mortgage-rates-are-declining-steadily-original.png" rel="noopener noreferrer" target="_blank"><img alt="No Caption Received" decoding="async" src="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240812/20240813-mortgage-rates-are-declining-steadily-original.png"/></a>Mortgage rates have improved lately in part because of <a href="https://www.simplifyingthemarket.com/2024/07/25/how-the-economy-impacts-mortgage-rates/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: blue;" target="_blank">recent economic</a>, employment, and inflation data. Moving forward, some rate volatility is to be expected. But if future economic data continues to show signs of cooling, experts say mortgage rates could keep going down.</p>
<p> Even a small drop can <a href="https://www.simplifyingthemarket.com/2024/07/16/how-to-determine-if-youre-ready-to-buy-a-home/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: blue;" target="_blank">help you out</a>. When rates decline, it’s easier to <a href="https://www.simplifyingthemarket.com/2024/07/22/how-affordability-and-remote-work-are-changing-where-people-live/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: blue;" target="_blank">afford</a> the home you want because your monthly payment will be lower. Just don’t expect them to go back down to 3%.</p>
<h4><strong>2. Home Prices</strong></h4>
<p>The second big thing to think about is <a href="https://www.simplifyingthemarket.com/2024/06/24/housing-market-forecast-whats-ahead-for-the-2nd-half-of-2024/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: blue;" target="_blank">home prices</a>. Nationally, they’re still going up this year, but <a href="https://www.simplifyingthemarket.com/2024/07/29/are-home-prices-going-to-come-down/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: blue;" target="_blank">not as fast</a> as they did a couple of years ago. The graph below uses home price <a href="https://www.spglobal.com/spdji/en/indices/indicators/sp-corelogic-case-shiller-20-city-composite-home-price-nsa-index/#news-research" rel="noopener noreferrer" style="color: blue;" target="_blank">data</a> from <em>Case-Shiller</em> to illustrate that point:</p>
<p><a href="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240812/20240813-home-prices-are-moderating-original.png" rel="noopener noreferrer" target="_blank"><img alt="No Caption Received" decoding="async" src="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240812/20240813-home-prices-are-moderating-original.png"/></a>If you’re thinking about buying a home, slower price growth is good news. <a href="https://www.simplifyingthemarket.com/2024/06/12/home-prices-arent-declining-but-headlines-might-make-you-think-they-are/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: blue;" target="_blank">Home prices</a> went up a lot during the pandemic, making it hard for many people to buy. Now, with prices rising more slowly, buying a home may feel less out of reach. As Odeta Kushi, Deputy Chief Economist at <em>First American</em>, <a href="https://blog.firstam.com/economics/for-potential-first-time-home-buyers-it-may-be-memphis-or-bust" rel="noopener noreferrer" style="color: blue;" target="_blank">says</a>: </p>
<blockquote><p><em>“While housing affordability is low for potential first-time home buyers, </em><strong><em>slowing price appreciation and lower mortgage rates could help</em></strong><em> – so the dream of homeownership isn’t boarded up just yet.”</em></p></blockquote>
<h4><strong>3. Wages</strong></h4>
<p>Another factor helping with affordability is rising wages. The graph below uses <a href="https://www.bls.gov/ces/" rel="noopener noreferrer" style="color: blue;" target="_blank">data</a> from the <em>Bureau of Labor Statistics</em> (BLS) to show how wages have increased over time:</p>
<p><a href="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240812/20240813-wages-climbing-at-a-faster-pace-original.png" rel="noopener noreferrer" target="_blank"><img alt="No Caption Received" decoding="async" src="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240812/20240813-wages-climbing-at-a-faster-pace-original.png"/></a>Look at the blue dotted line. It shows how wages usually go up in a typical year. On the right side of the graph, you’ll see wages are rising even faster than normal right now – that’s the green line.</p>
<p>This helps you because if your income increases, it’s easier to afford a home. That’s because you won’t have to spend as much of your paycheck on your monthly mortgage payment.</p>
<h3>Bottom Line</h3>
<p>When you put all these factors together, you see mortgage rates are trending down, home prices are rising more slowly, and wages are going up faster than usual. Though affordability is still a challenge, these trends are <a href="https://www.simplifyingthemarket.com/2024/07/18/unlocking-homebuyer-opportunities-in-2024/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: blue;" target="_blank">early signs</a> things might be starting to improve.</p>
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