Some affordability has crept back into the housing market, evidenced by the slight decrease in wages that buyers spent on buying homes in the first quarter of 2023, a recent report said.
The average amount Americans spent on buying a home dropped to 30%, still above the 28% of wages that financial experts recommend spending on a home purchase but below the 31% buyers spent in the final months of 2022, according to the ATTOM report.
Improved affordability is a result of home prices softening while wages rose 6% across the U.S. over the past year, the report said. Home prices dropped 0.9% from a year ago, with the median existing-home price coming in at $375,700 in March, according to the National Association of Realtors (NAR).
"The soaring housing market has finally come back down in much of the U.S., at least for now, while worker pay is growing," ATTOM CEO Rob Barber said. "That's produced some benefits for home seekers in the form of slightly better affordability, especially as lending rates have flattened out.
"Things certainly haven't swung way back into friendly territory," Barber continued. "Price drops and wage gains haven't yet translated into equal improvements in affordability. And the trend could go back the other way if interest rates go up again, as expected. But the scenario is becoming more favorable for buyers."
The slowdown in home prices and lower interest rates have made buying a home more affordable for some. If you are ready to shop for a mortgage loan or are looking to refinance an existing one, use the Credible marketplace to compare rates and lenders and get a mortgage preapproval letter in minutes.
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Mortgage rates have dropped in recent weeks after the Silicon Valley Bank (SVB) and Signature Bank collapse.
However, the Federal Reserve has signaled that it intends to keep battling inflation and hiked interest rate by another 25 basis points at its last meeting, bringing the federal funds rate to a targeted range of 4.75% to 5%, the highest level in 15 years.
It is uncertain if and when the central bank will raise rates again as it signaled that the recent bank failures might have the consequence of slowing lending and, by default, help further cool inflation. Until the impact is known, Fed Chair Jerome Powell noted that the Fed would proceed with a wait-and-see approach regarding future interest rate increases.
"With multiple uncertain economic forces at work, the market could continue sliding or turn back upward this Spring and Summer," Barber said. "That, along with the path of wages, will dictate whether homeownership continues to grow more affordable after a gradual path the other way over the past few years."
If you are looking to take advantage of lower mortgage rates by refinancing your mortgage loan, or are ready to shop for the best rate on a loan, consider visiting an online marketplace like Credible to compare rates. You can choose your loan term and get preapproved with multiple lenders at once to find one with the best rate for you.
Some top counties in the U.S. saw large quarterly decreases in home prices, making them more affordable as less average local wages are needed for major ownership expenses, ATTOM said in a separate report.
ATTOM noted that annual wages of more than $75,000 still are needed to afford median-priced homes purchased in 50% of the markets analyzed.
Here are the top five counties where homebuyers saw affordability improve the most:
The average local wages needed to buy a home here dropped to 13.8% in the first quarter of 2023 compared to 22.1% the quarter before.
Homebuyers spent 14.5% of their wages in the first quarter compared to 19.2% in the previous quarter to purchase a home in Robeson County.
Buyers spent 16.6% of their salaries in the first quarter, down from 21.8% in the quarter before to buy a home here.
Buyers saw their wage spend drop to 10.4% in the first quarter compared to 13.1% the previous quarter when buying a home in Peoria County.
This Ohio county also saw improved affordability. Homebuyers spent 19.6% of their wages, down from 24.6% the previous quarter.
If you're interested in becoming a homeowner, it can help to shop around for suitable mortgage rates. Visit Credible to compare options from different lenders at once, without affecting your credit score.
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