If you’ve beenfollowing the housing market over the last couple of years, you’ve likely heard
about growing affordability challenges. But according to experts, the key factors that determine housing affordability are
projected to improve this year. Selma Hepp, Executive, Deputy Chief Economist
“. . . with slowly improving affordability and
a more optimistic economic outlook than previously believed, the housing market
could show resilience in 2023.”
used to establish home affordability are home prices, mortgage rates, and
wages. Here’s a closer look at each one.
Mortgage rates shot up to over 7% last year, causing
many buyers to put their plans on hold. But things are looking
different today as rates are starting to come down. George Ratiu, Senior
Economist at realtor.com, explains:
“Let’s celebrate some good news. . . .
mortgage rates are down. With inflation showing a tangible slowdown, I do expect
mortgage rates to follow suit in the months ahead.”
rates can impact your purchasing power. Nadia Evangelou, Director of
Forecasting for the National Association of Realtors (NAR),
“With a 6% rate instead of 7%, buyers pay
about $2,700 less every year on their mortgage. As a result, owning a home
becomes affordable to about 1.4 million more renters and 4.3 million more
your homebuying plans last year, this could be the opportunity you need to get back in the game. Be
sure to work with a team of experts who know the latest on mortgage rates and
can give you the best advice for the current market.
play is home prices. Home prices have made headlines over the past few years
because they skyrocketed during the pandemic. When discussing home prices in
2023, Lawrence Yun, Chief Economist at NAR, says:
“After a big boom over the past two years,
there will essentially be no change nationally . . . Half of the country may
experience small price gains, while the other half may see slight price
likely be flat this year in some markets, others could see small gains or
slight declines. It all depends on your local area. For insight into what’s
happening in your market and how prices are impacting affordability, reach out
to a trusted real estate professional.
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: