Key Factors Affecting Home Affordability Today

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Every time there’s a news segment about the housing market, we hear about the affordability challenges buyers are facing today. Those headlines are focused on how much mortgage rates have climbed this year. And while it’s true rates have risen dramatically, it’s important to remember they aren’t the only factor in the affordability equation.

Here are three measures used to establish home affordability: home prices, mortgage rates, and wages. Let’s look closely at each one.

1. Mortgage Rates

This is the factor most people are focused on when they talk about homebuying conditions today. So far, current rates are almost four full percentage points higher than they were at the beginning of the year. As Len Kiefer, Deputy Chief Economist at Freddie Mac, explains:

“U.S. 30-year fixed mortgage rates have 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 increase in mortgage rates is impacting how much it costs to finance a home purchase, creating a challenge for many buyers that’s pricing some out of the market. While the current global uncertainty makes it difficult to project where mortgage rates will go in the future, experts do say that rates will likely remain high as long as inflation does.

2. Home Prices

The second factor at play is home prices. Home prices have made headlines over the past few years because they skyrocketed during the pandemic. Now, the most recent Home Price Index from S&P Case-Shiller shows home values continued to decelerate for a fifth consecutive month (shown in green in the graph below):

This deceleration is happening because higher mortgage rates are moderating demand, and as a result, easing the buyer competition and bidding wars that previously drove prices up.

What’s worth noting though, is how much higher home prices still are than they were before the pandemic (shown in blue in the graph above). Even now, we have a long way to go to get to more normal levels of home price appreciation, which is historically closer to 4%. When both mortgage rates and home prices are high, affordability and your purchasing power become a greater challenge.

But while prices are still elevated in many markets, some areas are seeing slight declines. It all depends on your local market. For insight into what’s happening in your area, reach out to a trusted real estate professional.

3. Wages

The one big, positive component in the affordability equation is the increase in American wages. The graph below uses data from the Bureau of Labor Statistics (BLS) to show how wages have grown over time. This year is no exception.

As the Bureau of Labor Statistics (BLS) reports:

“Median weekly earnings of the nation’s 120.2 million full-time wage and salary workers were $1,070 in the third quarter of 2022 (not seasonally adjusted), the U.S. Bureau of Labor Statistics reported…This was 6.9 percent higher than a year earlier…”

So, when you think about affordability, remember the full picture includes more than just mortgage rates. Home prices and wages need to be factored in as well. Because wages have been rising, they’re a big reason why serious buyers are still purchasing homes this year.

If you have questions or want to learn more, reach out to a trusted advisor who can explain how all of these variables work together and what’s happening in your area. As Leslie Rouda Smith, President of the National Association of Realtors (NAR), says:

“Buying or selling a home involves a series of requirements and variables, and it’s important to have someone in your corner from start to finish to make the process as smooth as possible… and objectivity to deliver trusted expertise to consumers in every U.S. ZIP code.”

Bottom Line

To learn more, let’s connect today and make sure you have a trusted lender so you’re able to make an informed decision if you’re planning to buy or sell a home right now.

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1720 Coronet Avenue, Aubrey, TX 76227

Do You Believe Homeownership Is Out of Reach? Maybe It Doesn’t Have To Be.

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It turns out, millennials aren’t the renter generation after all. The 2022 Consumer Insights Report from Mynd says there’s a portion of millennial and Gen Z buyers who are pursuing homeownership as a way to build their wealth, but it may not be exactly the way previous generations have done it. The study explains how they’re breaking into the market:

“. . . younger generations of Americans are not buying into that dream in the same way that older generations have. A growing number of Americans are choosing to make their first real estate purchase as an investment property.”

Instead of buying a home and moving into it themselves, some young buyers are purchasing a home so they can use it as a rental. This tactic may be gaining popularity, at least in part, because of the affordability challenges brought about by today’s higher mortgage rates. The report above mentions how many people in this group are considering this approach. It says:

“Almost half of Millennials and Gen Z (43%) are considering buying an investment property compared to only 9% of Baby Boomers and 27% of Gen X.”

Why Younger Buyers Are Buying a Home To Use as a Rental

This strategy allows buyers to continue living in their current location, like the bustle of a city apartment or a neighborhood that they know and love, where they couldn’t afford to buy. But instead of giving up on the idea of owning a home, they buy a home in a more affordable area with the intention of renting it out.

In a way, they’re getting the best of both worlds. They live where they want, and they still own a home where they can afford it.

Their goal is to generate passive income and diversify their assets. It works like this: in addition to having a rental stream of income, the equity they build in their house will also help grow their net worth over time.

Bottom Line

If you’re thinking about buying a home as an investment strategy to build your wealth, let’s connect to explore your options and nearby areas that may have homes that fit what you’re looking for.

1245 Chinkapin Place, Flower Mound, TX 75028

3 Trends That Are Good News for Today’s Homebuyers

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While higher mortgage rates are creating affordability challenges for homebuyers this year, there is some good news for those people still looking to buy a home.

As the market has cooled this year, some of the intensity buyers faced during the peak frenzy of the pandemic has cooled too. Here are just a few trends that may benefit you when you go to buy a home today.

1. More Homes To Choose from

During the pandemic, housing supply hit a record low at the same time buyer demand skyrocketed. This combination made it difficult to find a home because there just weren’t enough to meet buyer demand. According to Calculated Risk, the supply of homes for sale increased by 39.5% for the week ending October 28 compared to the same week last year.

Even though it’s still a sellers’ market and supply is still lower than more normal levels, you have more to choose from in your home search. That makes finding your dream home a bit less difficult.

2. Bidding Wars Have Eased

One of the top stories in real estate over the past two years was the intensity and frequency of bidding wars. But today, things are different. With more options, you’ll likely see less competition from other buyers looking for homes. According to the National Association of Realtors (NAR), the average number of offers on recently sold homes has declined. This September, the average was 2.5 offers per sale. In contrast, last September, the average was 3.7 offers per sale.

If you tried to buy a house over the past two years, you probably experienced the bidding war frenzy firsthand and may have been outbid on several homes along the way. Now you have a chance to jump back into the market and enjoy searching for a home with less competition.

3. More Negotiation Power

And when you have less competition, you also have more negotiating power as a buyer. Over the last two years, more buyers were willing to skip important steps in the homebuying process, like the appraisal or inspection, to try to win a bidding war. But the latest data from the National Association of Realtors (NAR) shows the percentage of buyers waiving those contingencies is going down.

As a buyer, this is good news. The appraisal and the inspection give you important information about the value and condition of the home you’re buying. And if something turns up in the inspection, you have more power today to renegotiate with the seller.

A survey from realtor.com confirms more sellers are accepting offers that include contingencies today. According to that report, 95% of sellers said buyers requested a home inspection, and 67% negotiated with buyers on repairs as a result of the inspection findings.

Bottom Line

While buyers still face challenges today, they’re not necessarily the same ones you may have been up against just a year or so ago. If you were outbid or had trouble finding a home in the past, now may be the moment you’ve been waiting for. Let’s connect to start the homebuying process today.

8411 County Road 138, Celina, TX 70059

Millennials Are Still a Driving Force of Today’s Buyer Demand

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If you’re thinking about selling your house but wondering if buyers are still out there, know that there are still people who are searching for a home to buy today. And your house may be exactly what they’re looking for.

While the millennial generation has been dubbed the renter generation, that namesake may not be appropriate anymore. Millennials, the largest generation, are actually a significant driving force for buyer demand in the housing market today. Here’s why.

Millennial Homebuying Power

While there’s no denying higher mortgage rates are making it more challenging to afford a home today, many millennials are still eager and able to buy homes – whether it’s their first or they’re moving up. That’s in large part because of the value they place on education.

A recent article from First American says millennials may be the most educated generation in our nation’s history. Because of that, they tend to earn higher wages, and that translates to greater homebuying power. Odeta Kushi, Deputy Chief Economist at First American, explains:

“In 2020, millennials with a bachelor’s degree had a median household income of over $100,000, while those with at least a graduate degree had a median household income of over $120,000. Compare those income levels with the median household income of millennials with just a high school degree (or some college) of $60,000 and the earning power benefits of higher education are undeniable. . . . Millennials’ pursuit of higher education is good news for the housing market. . . because education is the key to unlock both greater earning power and, in turn, homeownership.”

And since wages are one of the key things that factor into affordability when it comes to buying a home, these higher earnings can help millennials achieve their homeownership goals.

Millennials Continue To Be a Driving Force of Demand

A number of studies have looked into how the millennial generation views homeownership and how they’re uniquely positioned to define the housing market moving forward. As the largest generation, the volume of potential millennial homebuyers will have an impact on the market for years to come. As an article in Forbes explains:

“At about 80 million strong, millennials currently make up the largest share of homebuyers (43%) in the U.S., according to a recent National Association of Realtors (NAR) report. Simply due to their numbers and eagerness to become homeowners, this cohort is quite literally shaping the next frontier of the homebuying process. Once known as the ‘rent generation,’ millennials have proven to be savvy buyers who are quite nimble in their quest to own real estate. In fact, I don’t think it’s a stretch to say they are the key to the overall health and stability of the current housing industry.”

If you’re thinking of selling your house but are hesitant because you’re worried that buyer demand has disappeared in the face of higher mortgage rates, know that isn’t the case for everyone. While demand has eased this year, millennials are still looking for homes. As Mark Fleming, Chief Economist at First American, says in an article:

“While not the frenzy of 2021, the largest living generation, the Millennials, will continue to age into their prime home-buying years, creating a demographic tailwind for the housing market.”

Bottom Line

Millennials are interested in and well-positioned to achieve their homeownership dreams. If you’re ready to sell your house, know that it may be just what they’re looking for.

1720 Coronet Avenue, Aubrey, TX 76227

1245 Chinkapin Place, Flower Mound, TX

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This 2-Story is Brimming with Luxurious Living Space! You will Love Coming Home to this 4 Bedroom, 2.5 Full Bath, 2 Car Garage + Formal Dining & Huge Flex Room Perfect for 2nd Living or Game Room. The Welcoming Foyer Greets you with Rich Wood Flooring, Architectural Details & Artsy Niches. Enter into the Heart of the Home & Find Yourself Wowed by the Open Concept Floorplan. You will Never Miss out on Conversation in the Kitchen while Entertaining in the Family Room Featuring Floor to Ceiling Gas Fireplace & Wood Mantle. The Gourmet Kitchen Boasts Quartz Countertops, 42-inch Cabinets, Stainless Steel Appliances, Double Ovens, Custom Backsplash & a Large Island. Spacious Owners Suite Displays Farmhouse Sinks, a Separate Shower, Jetted Tub & a Walk-In Closet. Additional Bedrooms are a Great Size & have Large Closets. Flex Room has French Doors for Privacy. Enjoy the Peaceful Backyard Including a Large Patio, Tons of Yard Space, Mature Trees, Room for a Pool & Storage Shed Stays!

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What Happens to Housing when There’s a Recession?

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Since the 2008 housing bubble burst, the word recession strikes a stronger emotional chord than it ever did before. And while there’s some debate around whether we’re officially in a recession right now, the good news is experts say a recession today would likely be mild and the economy would rebound quickly. As the 2022 CEO Outlook from KPMG says:

“Global CEOs see a ‘mild and short’ recession, yet optimistic about global economy over 3-year horizon . . .

More than 8 out of 10 anticipate a recession over the next 12 months, with more than half expecting it to be mild and short.”

To add to that sentiment, housing is typically one of the first sectors to rebound during a slowdown. As Ali Wolf, Chief Economist at Zonda, explains:

“Housing is traditionally one of the first sectors to slow as the economy shifts but is also one of the first to rebound.”

Part of that rebound is tied to what has historically happened to mortgage rates during recessions. Here’s a look back at rates during previous economic slowdowns to help put your mind at ease.

Mortgage Rates Typically Fall During Recessions

Historical data helps paint the picture of how a recession could impact the cost of financing a home. Looking at recessions in this country going all the way back to 1980, the graph below shows each time the economy slowed down mortgage rates decreased.

Fortune explains mortgage rates typically fall during an economic slowdown:

“Over the past five recessions, mortgage rates have fallen an average of 1.8 percentage points from the peak seen during the recession to the trough. And in many cases, they continued to fall after the fact as it takes some time to turn things around even when the recession is technically over.”

While history doesn’t always repeat itself, we can learn from and find comfort in the trends of what’s happened in the past. If you’re thinking about buying or selling a home, you can make the best decision by working with a trusted real estate professional. That way you have expert advice on what a recession could mean for the housing market.

Bottom Line

History shows you don’t need to fear the word recession when it comes to the housing market. If you have questions about what’s happening today, let’s connect so you have expert advice and insights you can trust.

3218 Squireswood Drive, Carrollton, TX 75006

What’s Ahead for Home Prices?

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As the housing market cools in response to the dramatic rise in mortgage rates, home price appreciation is cooling as well. And if you’re following along with headlines in the media, you’re probably seeing a wide range of opinions calling for everything from falling home prices to ongoing appreciation. But what’s true? What’s most likely to happen moving forward?

While opinions differ, the most likely outcome is we’ll fall somewhere in the middle of slight appreciation and slight depreciation. Here’s a look at the latest expert projections so you have the best information possible today.

What the Experts Are Saying About Home Prices Next Year

The graph below shows the most up-to-date forecasts from five experts in the housing industry. These are the experts that have most recently updated their projections based on current market trends:

As the graph shows, the three blue bars represent experts calling for ongoing home price appreciation, just at a more moderate rate than recent years. The red bars on the graph are experts calling for home price depreciation.

While there isn’t a clear consensus, if you take the average (shown in green) of all five of these forecasts, the most likely outcome is, nationally, home price appreciation will be fairly flat next year.

What Does This Mean?

Basically, experts are divided on what’s ahead for 2023. Home prices will likely depreciate slightly in some markets and will continue to gain ground in others. It all depends on the conditions in your local market, like how overheated that market was in recent years, current inventory levels, buyer demand, and more.

The good news is home prices are expected to return to more normal levels of appreciation rather quickly. The latest forecast from Wells Fargo shows that, while they feel prices will fall in 2023, they think prices will recover and net positive in 2024. That forecast calls for 3.1% appreciation in 2024, which is a number much more in line with the long-term average of 4% annual appreciation.

And the Home Price Expectation Survey (HPES) from Pulsenomics, a poll of over one hundred industry experts, also calls for ongoing appreciation of roughly 2.6 to 4% from 2024-2026. This goes to show, even if prices decline slightly next year, it’s not expected to be a lasting trend.

As Jason Lewris, Co-Founder and Chief Data Officer for Parcl, says:

“In the absence of trustworthy, up-to-date information, real estate decisions are increasingly being driven by fear, uncertainty, and doubt.”

Don’t let fear or uncertainty change your plans. If you’re unsure about where prices are headed or how to make sense of what’s going on in today’s housing market, reach out to a local real estate professional for the guidance you need each step of the way.

Bottom Line

The housing market is shifting, and it’s a confusing place right now. Let’s connect so you have a trusted real estate professional to help you make confident and informed decisions about what’s happening in our market.

8411 County Road 138, Celina, TX 70059

The Latest on Supply and Demand in Housing

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Over the past two years, the substantial imbalance of low housing supply and high buyer demand pushed home sales and buyer competition to new heights. But this year, things are shifting as supply and demand reach an inflection point.

The graph below helps tell the story of just how different things are today.

The Latest on Supply and Demand in Housing | MyKCM

This year, buyer demand has eased as higher mortgage rates and mounting economic uncertainty moderated the market. This slowdown in demand is clear when you look at the red bar on the graph. It uses the latest data from ShowingTime to illustrate how showings (an indicator of buyer demand) have softened by just over 12% compared to the same time last year.

Now for a look at how housing supply has changed, turn to the green bar. It uses data from realtor.com to show active listings are up nearly 27% compared to last year. That’s because the moderation of demand allowed housing inventory to increase in 2022.

What Does This Inflection Point Mean for Buyers?

If you’re thinking of buying a home, you’ll have less competition and more options than you would have had last year. Enjoy having more homes to choose from in your home search and lean on a trusted real estate professional to understand how the increase in supply has also increased your negotiation power. That professional can talk you through the opportunities and challenges buyers face in today’s shifting market. You may be surprised to find they’re different than they were a year ago.

What Does This Inflection Point Mean for Sellers?

If you’re looking to sell your house, know that inventory is still low overall. That means, if you work with an agent to price your house based on current market value, it will still sell despite the inventory gains and moderating buyer demand this year. That’s because there are still buyers out there who want to move, and your house may be exactly what they’re looking for.

Bottom Line

If you’re thinking of buying or selling a home, the best place to turn to for information on today’s supply and demand is a trusted real estate professional. Let’s connect so you know what’s happening in our local market and what that means for you.

1245 Chinkapin Pl, Flower Mound, TX 75028

1245 Chinkapin Place, Flower Mound, TX – Just Listed

1245 Chinkapin Place, Flower Mound, TX

Just Listed

Presented By:

GroupWatson Real Estate Team

Broker / Realtors
GroupWatson Real Estate Team – Keller Williams DPR
214-682-7002
Licensed In: Texas
License #: 0425191

Schedule a Showing/Request Info

$ Click for current price
4 BEDROOMS | 2 Full, 1 Half Baths BATHROOMS | 2557 SqFt

Each Keller Williams office is independently owned and operated. Not intended to solicit business of individuals currently represented by a real estate broker.

1245 Chinkapin Place, Flower Mound, TX – Coming Soon

1245 Chinkapin Place, Flower Mound, TX

Coming Soon

Presented By:

GroupWatson Real Estate Team

Broker / Realtors
GroupWatson Real Estate Team – Keller Williams DPR
214-682-7002
Licensed In: Texas
License #: 0425191

Schedule a Showing/Request Info

$ Click for current price
4 BEDROOMS | 2 Full, 1 Half Baths BATHROOMS | 2557 SqFt

$10k Allowance towards Closing Cost, Paint, Sod or Interest Rate Buy Down! This 2-Story is Brimming with Luxurious Living Space! You will Love Coming Home to this 4 Bdrm, 2.5 Full Bath, 2 Car Gar + Foral Dining & Huge Flex Rm Perfect for 2nd Living or Game Rm. The Welcoming Foyer Greets you with Rich Wood Flooring, Architectural Details & Artsy Niches. Enter into the Heart of the Home & Find Yourself Wowed by the Open Concept Floorplan. You will Never Miss out on Conversation in the Kitchen while Entertaining in the Family Rm Featuring Floor to Ceiling Gas FP & Wood Mantle. The Gourmet Kitchen Boasts Quartz C-tops, 42-inch Cabs, SS Appl's, Dbl Ovens, Custom Bcksplsh & a Large Island. Spacious Owners Suite Displays Farmhouse Sinks, a Separate Shower, Jetted Tub & a Walk-In Closet. Addtl Bdrms are a Great Size & have Large Closets. Flex Rm has French Drs for Privacy. Enjoy the Peaceful Backyard Including a Large Patio, Tons of Yard Space, Mature Trees, Rm for a Pool & Storage Shed Stays!

Each Keller Williams office is independently owned and operated. Not intended to solicit business of individuals currently represented by a real estate broker.

1. Mortgage Rates

2. Home Prices

Bottom Line

Why Younger Buyers Are Buying a Home To Use as a Rental

Bottom Line

1. More Homes To Choose from

2. Bidding Wars Have Eased

3. More Negotiation Power

Bottom Line

Millennial Homebuying Power

Millennials Continue To Be a Driving Force of Demand

Bottom Line

1245 Chinkapin Place, Flower Mound, TX

Presented By:

GroupWatson Real Estate Team

$ Click for current price4 BEDROOMS | 2 Full, 1 Half Baths BATHROOMS | 2557 SqFt

Mortgage Rates Typically Fall During Recessions

Bottom Line

What the Experts Are Saying About Home Prices Next Year

What Does This Mean?

Bottom Line

What Does This Inflection Point Mean for Buyers?

What Does This Inflection Point Mean for Sellers?

Bottom Line

1245 Chinkapin Place, Flower Mound, TX

Presented By:

GroupWatson Real Estate Team

$ Click for current price4 BEDROOMS | 2 Full, 1 Half Baths BATHROOMS | 2557 SqFt

1245 Chinkapin Place, Flower Mound, TX

Presented By:

GroupWatson Real Estate Team

$ Click for current price4 BEDROOMS | 2 Full, 1 Half Baths BATHROOMS | 2557 SqFt

$ Click for current price
4 BEDROOMS | 2 Full, 1 Half Baths BATHROOMS | 2557 SqFt

$ Click for current price
4 BEDROOMS | 2 Full, 1 Half Baths BATHROOMS | 2557 SqFt

$ Click for current price
4 BEDROOMS | 2 Full, 1 Half Baths BATHROOMS | 2557 SqFt