Lately, many folks have been chatting about the challenges of purchasing a home. While it's true that affordability remains a concern, there are some indications that things might be looking up and could continue to improve as the year progresses. According to Elijah de la Campa, Senior Economist at Redfin:

““We’re slowly climbing our way out of an affordability hole, but we have a long way to go. Rates have come down from their peak and are expected to fall again by the end of the year, which should make homebuying a little more affordable and incentivize buyers to come off the sidelines.”
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— Elijah de la Campa, Senior Economist at Redfin

Let's take a peek at the most recent information regarding the top three factors that play a role in home affordability: mortgage rates, home prices, and wages.

1. Mortgage Rates

Mortgage rates have shown a lot of ups and downs this year, fluctuating between the upper 6% and low 7% range. These rates are noticeably higher compared to a few years back. However, there is a small positive development to note.

Despite the recent ups and downs, interest rates are currently lower compared to last autumn when they almost hit 8%. Moreover, many experts anticipate that rates will decrease further throughout the year. According to a recent article by Bright MLS:

““Expect rates to come down in the second half of 2024 but remain above 6% this year. Even a modest drop in rates will bring both more buyers and more sellers into the market.”
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— Bright MLS

Just wanted to share that even a slight drop in rates can have a big impact on your home-buying journey. When rates take a dip, it means you might be able to snag the home you've been eyeing more comfortably since your monthly payments would shrink.

2. Home Prices

Another key aspect to consider is the prices of homes. Many professionals predict that prices will continue to rise this year, albeit at a more moderate rate. This is due to the increased number of homes available on the market compared to previous years, although the supply is still insufficient to meet the demands of all potential buyers. The chart below illustrates the most recent 2024 forecasts for home prices from seven different reputable organizations.

The forecasts bring some good news for you - it looks like prices won't be skyrocketing like they did in the pandemic. They're not expected to drop either, just climb at a more moderate pace.

3. Wages

One reason why homes are more affordable at the moment is because wages are increasing. Take a look at the graph below, which illustrates the growth of wages over time using data from the Federal Reserve.

Have you checked out the blue dotted line on the graph? It gives you an idea of how wages usually go up. And hey, take a look at the right side of the graph – wages are actually growing even quicker than usual at the moment.

If your income has gone up, it becomes more manageable to purchase a home since you won't need to allocate as much of your monthly earnings towards your mortgage payment.

Bottom Line

When you consider all these aspects together, it looks like mortgage rates are expected to decrease further later this year, while home prices are rising at a more steady rate, and wages are increasing faster than usual. These trends indicate a positive outlook for your potential to purchase a home.