Every time the property market is discussed on the news, we learn about purchasers’ difficulties with affordability. Those headlines emphasize the increase in mortgage rates over the course of this year. And although rates have indeed increased significantly, it’s vital to keep in mind that there are other aspects of affordability to consider.
Property prices, mortgage rates, and earnings are the criteria to determine if a home is affordable. Let’s examine each in more detail.
Rates on Mortgages
Most people who discuss the current state of homebuying circumstances concentrate on this aspect. Current rates have risen by over four total percentage points since the year’s start.
The cost of financing a house purchase is affected by the rise in mortgage rates, making it difficult for many purchasers and driving some out of the market. Although it is impossible to predict where mortgage rates will go in the future due to global unrest, experts agree that they will likely stay high for as long as inflation does.
Home Costs
Home prices are the second issue at play. Home prices surged during the epidemic and garnered media attention over the past few years. According to the most recent S&P Case-Shiller Home Price Index, home prices have declined for a sixth consecutive month.
Higher mortgage rates reduce demand, lessening buyer rivalry, and bidding wars that previously drove prices up. As a result, this slowdown is taking place.
The fact that housing values are still significantly higher than before the epidemic is noteworthy. Even today, home price growth will take some time to return to more typical levels, which generally hover around 4%. The difficulty of maintaining affordability and buying power increases when both mortgage rates and housing prices are high.
However, while prices are still high in many marketplaces, certain regions are experiencing minor drops. Everything is based on your local market. Contact a reputable real estate expert for information on what’s going on in your neighborhood.
The Real Estate Edge 