Over the past few years, many people have struggled to buy homes. While purchasing a home is still challenging, the situation has gradually been improving, and there is potential for further improvement by the end of this year. Below, you’ll find the latest data on the three key factors that influence home-buying conditions: mortgage rates, home prices, and wages.
1. Mortgage Rates
This year, mortgage rates have fluctuated between the mid-6% and low-7% range. However, there is good news. According to data from Freddie Mac, rates have generally been trending downward since May:
The recent improvement in mortgage rates is due to recent economic, employment, and inflation data. While volatility in rates is expected to continue, experts believe that if economic data shows signs of cooling, mortgage rates could continue to decline. Even a slight decrease in rates can significantly help with home purchases, as lower rates reduce monthly payments, making it easier to buy the home you want. However, it’s important not to expect rates to drop back down to the 3% range.
2. Home Prices
The second factor to consider is home prices. While home prices are still rising nationwide this year, they are not increasing as rapidly as they did in previous years. The graph below uses Case-Shiller home price data to illustrate this:
If you’re considering buying a home, the slower pace of price increases is good news. During the pandemic, home prices surged, making it difficult for many people to afford a home. Now, with prices rising more slowly, purchasing a home may feel less burdensome. According to First American’s Deputy Chief Economist, Odeta Kushi, while housing affordability remains challenging for potential first-time homebuyers, the slowing pace of price growth and declining mortgage rates mean the dream of homeownership is not entirely out of reach.
3. Wages
Another factor improving home-buying conditions is rising wages. The graph below uses data from the U.S. Bureau of Labor Statistics (BLS) to show how wages have increased over time:
The blue dotted line represents typical annual wage growth. As shown by the green line on the right side of the graph, current wages are increasing faster than usual.
This is positive because higher income makes buying a home easier, as you will spend a smaller percentage of your salary on monthly mortgage payments.
Conclusion
Taking all these factors together, mortgage rates are trending downward, home prices are rising more slowly, and wages are increasing faster than usual. While purchasing a home is still not easy, these trends suggest that conditions are improving.
As always, the information I share provides a broader perspective. Of course, circumstances may differ depending on where you are, so be sure to consult with a knowledgeable local realtor. I look forward to sharing more valuable insights next time.
Comments