Skyrocketing home prices have previously made homeownership feel like a pipe dream for most Americans. Potential homebuyers were shocked to learn they couldn’t afford a home in their preferred neighborhoods. Outpriced and outmaneuvered, many prospects resort to putting their homeowning dreams on the back burner.
However, if you’ve previously paused your search for the perfect house, you should consider jumping back in. Recent developments in the housing market are helping more Americans become homeowners. Dig in as we explore the top three reasons why home affordability is getting better.
Mortgage Rates are Down
Mortgage rates—the cornerstone of a successful homeowning experience—are declining once again. Interest rates have a significant impact on home affordability because they affect the cost of borrowing. Lower interest rates translate into lower monthly payments, allowing more people to qualify for mortgages.
Better still, dropping rates lets you qualify for a higher loan amount without subjecting you to financial headwinds down the road. You can comfortably secure the loan amount you need to secure your dream home without compromising on the location or features.
More importantly, lower interest rates lower the final cost of your home by reducing the total amount of interest payable over the life of your loan. You get more value for your money if you lock in an ultralow mortgage rate when buying a home.
Home Prices are Leveling Off
Skyrocketing prices have proven a significant homeownership barrier in the U.S. For years, home prices have continually risen, outpricing many buyers from their preferred market and making homeownership a pipe dream for the average buyer.
However, recent data suggests that home prices are stabilizing. The leveling off marks a key turning point in the country’s real estate market. It creates a balanced market that empowers buyers to negotiate better terms.
When demand outstrips supply, the real estate is characterized by frenzied bidding wars and inflated property prices.
It creates a terse environment that makes buying a home feel like a losing race. You’re forced to make quick decisions that may see you pay well over the asking price to secure your dream home.
Experts posit that a changing American Dream also plays a crucial role in moderating home prices across the country. Previously, a starter home was a house with a white picket fence in a nice neighborhood, but that’s no longer the case.
Today, first-time homebuyers are highly cost-conscious. They’ll easily settle for a small fixer-upper condo if it checks all the right boxes.
Small starter homes allow you to secure your homeowning dreams without saddling you with a mortgage that you cannot afford.
Wages are Climbing
The average wages and salaries for American workers have risen steadily over the last couple of years. Higher wages mean larger discretionary income, allowing you to spend more on a home without running into financial headwinds.
Rising wages also give you greater financial flexibility while increasing your creditworthiness. You can raise a larger down payment, lower your debt-to-loan ratio, and raise your credit score—all of which give you an edge when negotiating your mortgage rates.
A strong financial outlook also increases your home-buying options. Instead of considering a home a financial burden, you can approach the process with an investment mindset. For instance, you may be willing to consider a fixer-upper or compromise on certain features because you can afford the upgrades over time.
As such, you may adjust your house-hunting approach to target hidden gems in overlooked markets while ensuring they’re aligned with your financial goals.
Secure Your Dream Home
Thinking of becoming a homeowner? Now is the time to act. A trifecta of factors—low prevailing interest rates, dropping home prices, and higher wages—is tilting the odds in your favor. It creates a balanced real estate market while giving you the financial leverage you need to secure better mortgage terms so you can buy your dream home without running into financial pitfalls.
Need help securing your dream home? Talk to one of our Loan Officers today!
