3 factors that determine affordability in the real estate market
- By Miguel E. Hernandez
- Jan 25, 2023
The real estate market in recent years has been experiencing unexpected changes and for some buyers, this affects their decision making. Here I will show you 3 aspects that influence the affordability of homes in Florida.
An accurate definition of affordability, when we talk about the real estate market, refers to the economic capacity that buyers have to be able to start and complete a purchase process. Currently the United States is going through difficult times, inflation in all major areas, an increase in mortgage rates and a set of new policies has caused housing affordability to be strongly affected.
However, Real Estate professionals estimate that this level of affordability will stabilize in 2023, according to economist Selma Hepp of CoreLogic, shared in an interview the following:
“… “With affordability slowly improving and the economic outlook more optimistic than previously believed, the housing market could show resilience in 2023.”
To determine the level of housing affordability in the real estate market, 3 main factors are evaluated: mortgage rates, home prices and salaries. Below, we will detail them better.
Mortgage rates: By mid-2022, mortgage rates skyrocketed to 7%, after coming off the lowest lows in the last 40 years ;os, during 2021 mortgage rates of up to 1% were seen. However, for this year, analysts specializing in real estate estimate that mortgage rates will drop in 2023. Despite having increased, even the mortgage rate of 7% is far from its historical maximum. .
In mid-2022, many buyers stopped their purchases and investments due to the rise in mortgage rates, but this year they could resume their purchasing process.
The price of housing: since the beginning of the pandemic, the price of housing has been experiencing constant increases. For this year, specialists predict that prices will stabilize slightly. little, although its appreciation is maintained, but at a slower pace. The price of the homes will depend on also from the local market, as well as If you are thinking of buying or investing, the best thing you could do is have the help of a professional Realtor who knows the market and gives you a clear perspective.
Salaries: This is the final component in our formula for calculating housing affordability. It is perhaps the most determining factor, since salaries determine the purchasing power of the buyer. Below, we will see a graph from the Bureau of Labor Statistics (BLS). showing the increase in weekly wages in the United States:
In short, you could say that housing affordability will not improve over time. not at all, but it will provide great opportunities for many buyers. If you are considering buying or investing in the United States, contact us and together with our team of professionals, we will show you the opportunities that has in the current real estate market.