Buying a home has been tough for a while, but there are some signs that things might be starting to ease up. While affordability is still a bit of a squeeze, it looks like it could be improving as the year goes on. Lawrence Yun, Chief Economist at the National Association of Realtors, puts it this way:

“Housing affordability is improving ever so modestly, but it is moving in the right direction.”

Let’s break down the latest updates on the three big factors affecting home affordability: mortgage rates, home prices, and wages.

1. Mortgage Rates

Mortgage rates have been all over the place this year, swinging between the mid-6% and low 7% range. But here’s some good news: rates have been on a downward trend since May. Check out the graph below for a visual:

Recent economic, employment, and inflation data are helping rates to dip a bit. While there might still be some ups and downs, if the economy keeps cooling off, we could see rates drop further. Even a small decrease can make a difference, lowering your monthly payment. Just don’t expect rates to hit those 3% lows again.

2. Home Prices

Next up is home prices. They’re still going up, but not as quickly as before. Check out the graph from Case-Shiller:

For those looking to buy, slower price increases are a win. Prices shot up a lot during the pandemic, making it tough to buy. Now, with the pace slowing down, buying a home might feel more within reach. As Odeta Kushi, Deputy Chief Economist at First American, says:

“While housing affordability is low for potential first-time home buyers, slowing price appreciation and lower mortgage rates could help – so the dream of homeownership isn’t boarded up just yet.”

3. Wages

Wages are also playing a part in making homes more affordable. The graph below shows how wages have been increasing:

The blue dotted line shows the usual wage growth, while the green line on the right shows that wages are rising even faster right now. This boost means you’ll have more income to put towards your mortgage, making homeownership a bit easier.

Bottom Line

So, what’s the takeaway? Mortgage rates are trending down, home prices are growing more slowly, and wages are on the rise. Even though affordability is still a challenge, these signs suggest that things might be starting to look up.