Interest rates, home prices, and sensational headlines have you feeling stuck and scared to even try buying a house. I’m sure you are aware how the market the last two years was really competitive for buyers and now high interest rates and still high house prices have you really discouraged.
Let’s look at the key factors for home affordability a little closer, it’s probably not as bad as you think, people are still buying houses, and you can probably buy one too! Hi , I’m Sherri Echols, Broker Associate with RE/MAX Bryan – College Station.
Today, three factors are used to gauge home affordability: Current mortgage rates, home price, and wages. So, let’s look at all three to see what challenges buyers might face in today’s market, and possible ways to work around them.
The fluctuation in mortgage rates is what buyers seem to be most focused on today in their search. There is no question that higher rates may adjust the price range we shop in.
This year rates have gone up almost four percentage points. According to Len Kiefer, Deputy Chief Economist at Freddie Mac, “The 30-year fixed mortgage rate has increased 3.83 percentage points since the end of last year. That’s the biggest year-to-date increase in rates in over 50 years.”
That sounds really bad doesn’t it. A temporary or permanent rate buydown might just solve your problem. This is something we can ask the seller for in negotiations. Another idea you’ve probably heard is go ahead and buy now and then refinance later if rates drop enough to make a difference for you. If this is your plan, keep your credit report clean!
Home prices are the next key affordability criteria. Prices have come down a little bit in recent months, but they are still much higher than they were “pre-pandemic.” Some buyers are waiting for prices to go back down closer to pre-pandemic rates. I haven’t heard ANY experts predicting this big a reduction. There is pent up demand still waiting for improved market conditions.
When the mortgage rate does drop, you can bet there will be another frenzy of buyers out there trying to snatch up the still limited inventory. Higher prices are here to stay for quite a while so we need to adjust expectations to what price range is comfortable for you. Remember this, once you buy, you will be building wealth and gaining equity. You can use that equity later, along with more savings, to afford the dream home.
And what about wages? Wages are predicted to go up 4.1% to 4.6% next year instead of the standard 3%. This is still behind current inflation numbers so again, the expectations for the home budget may just have to be tweaked a little bit. You have to start somewhere. If prices are going to keep going up, now is absolutely the best time to buy, even Dave Ramsey says so.
All things considered, the first step will STILL be to talk with a lender and get pre-approved for a price range to shop in. Once we have that number, we look for the house that suits you the best from that price range. I have several excellent local lenders I can refer you to.
We will all be a team working toward home ownership for you. Call me and let’s get started. I’m your Community Market Leader Sherri Echols, a helping hand for a happy home.
