Affordability Archives - Page 2 of 2

The Great Wealth Transfer: A New Era of Opportunity

August 14, 2024/in Affordability, Economy /by Bradley Mayhew

In recent years, there’s been a significant shift in how wealth is distributed among generations. It’s called the Great Wealth Transfer.

Historically, the transfer of wealth from one generation to the next was a more gradual process, often limited to smaller amounts of inheritance or family savings. But today, the scale has increased in a big way. As a recent article from Bankrate says:

“The biggest wave of wealth in history is about to pass from Baby Boomers over the next 20 years, and it’s going to have major impacts on many facets of life. Called The Great Wealth Transfer, $84 trillion is poised to move from older Americans to Gen X and millennials. If it’s managed smartly, Americans will be able to grow their wealth and ensure their financial security.”

Basically, as more Baby Boomers retire, sell businesses, or downsize their homes, more substantial assets are being passed down to younger generations. And this creates a powerful ripple effect that’ll continue over the next few decades. The graph below uses data from Merrill and Cerulli Associates to give you an idea of how much inherited money is set to change hands through 2045:

Impact on the Housing Market

One of the most immediate effects of this wealth transfer is on the housing market. Home affordability has been a concern for many aspiring buyers, especially in high-demand areas. The increase in generational wealth is expected to ease some of these challenges by providing future homeowners with greater financial resources. As assets are passed down through generations, buyers may find themselves in a better position to afford homes. Merrill talks about that benefit in a recent article:

“While millennials face steep barriers . . . to buying a first home in many markets, ‘that’s a for-now story, not a forever story’ . . . The Great Wealth Transfer should enable more of them to become homeowners — or trade up or add a second home — either through inherited property or the funds for a down payment.”

Impact on the Economy

But the Great Wealth Transfer doesn’t just impact housing. It’s also going to provide a new avenue for entrepreneurial spirits to fuel economic growth. If someone is looking to start a business and they’re receiving funds like this, that money can used as the necessary capital to start a new company. This helps the next generation of innovators and business owners bring their ideas to life.

Bottom Line

While affordability remains a challenge in today’s housing market, the ongoing Great Wealth Transfer is poised to unlock new opportunities. As wealth is passed down and put to use, it’s expected to ease some of the barriers to homeownership and fuel other entrepreneurial endeavors.

Is Affordability Starting To Improve?

August 13, 2024/in Affordability, Economy, For Buyers, Home Prices, Mortgage Rates /by Bradley Mayhew

Over the past couple of years, a lot of people have had a hard time buying a home. And while affordability is still tight, there are signs it’s getting a little better and might keep improving throughout the rest of the year. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

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

Here’s a look at the latest data on the three biggest factors affecting home affordability: mortgage rates, home prices, and wages.

1. Mortgage Rates

Mortgage rates have been volatile this year, bouncing around from the mid-6% to low 7% range. But there’s some good news. Data from Freddie Mac shows rates have been trending down overall since May (see graph below):

Mortgage rates have improved lately in part because of recent economic, employment, and inflation data. Moving forward, some rate volatility is to be expected. But if future economic data continues to show signs of cooling, experts say mortgage rates could keep going down.

Even a small drop can help you out. When rates decline, it’s easier to afford the home you want because your monthly payment will be lower. Just don’t expect them to go back down to 3%.

2. Home Prices

The second big thing to think about is home prices. Nationally, they’re still going up this year, but not as fast as they did a couple of years ago. The graph below uses home price data from Case-Shiller to illustrate that point:

If you’re thinking about buying a home, slower price growth is good news. Home prices went up a lot during the pandemic, making it hard for many people to buy. Now, with prices rising more slowly, buying a home may feel less out of 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

Another factor helping with affordability is rising wages. The graph below uses data from the Bureau of Labor Statistics (BLS) to show how wages have increased over time:

Look at the blue dotted line. It shows how wages usually go up in a typical year. On the right side of the graph, you’ll see wages are rising even faster than normal right now – that’s the green line.

This helps you because if your income increases, it’s easier to afford a home. That’s because you won’t have to spend as much of your paycheck on your monthly mortgage payment.

Bottom Line

When you put all these factors together, you see mortgage rates are trending down, home prices are rising more slowly, and wages are going up faster than usual. Though affordability is still a challenge, these trends are early signs things might be starting to improve.

Where Will You Go After You Sell?

August 8, 2024/in Affordability, For Buyers, For Sellers, New Construction /by Bradley Mayhew

If you’re planning to sell your house and move, you probably know there’s been a shortage of options available. But here’s the good news: the supply of homes for sale has grown in a lot of markets this year – and that’s not just existing, or previously-owned, homes. It’s true for newly built homes too.

So how do you decide which route to go? Do you buy an existing home or a brand-new one? The choice is yours – you just need to figure out what’s most important to you.

Perks of a Newly Built Home

Here are some benefits of buying a newly built home right now:

Have brand new everything with never-been-used appliances and materials
Use energy efficient options to save money and leave a smaller footprint
Minimize the need for repairs and benefit from builder warranties
Take advantage of builder concessions that can help with affordability

In today’s market, a lot of builders are focusing on selling their current inventory before they add more homes to their mix. And some of them are offering concessions and are more willing to negotiate to make a sale happen.

That, coupled with the fact builders are primarily building smaller, more affordable homes, has led to one other potential perk. The median price for a newly built home in today’s market is actually lower than the median price of an existing home – which isn’t usually the case. Ralph McLaughlin, Senior Economist at Realtor.com, shares:

“Homebuyers who are looking for that ‘new-home smell’ may be in a relatively friendlier market than times past when new homes were considerably more expensive than used ones.”

If you’re interested in seeing what builders nearby have to offer, lean on your real estate agent. Their knowledge of local builders, new communities, and builder contracts will be important in this process.

Perks of an Existing Home

Now, let’s compare that to the benefits of buying an existing home.

Join an established neighborhood that you can get a feel for before moving in
Choose from a wider variety of floorplans and styles
Appreciate the lived-in charm that only an older home can provide
Enjoy the privacy and curb appeal of mature trees and landscaping

In addition to these lifestyle benefits, there’s strategic value to buying an existing home, too. Remember, you can always make upgrades to an existing home down the road to give it some of the latest features available. This gives you the best of both worlds: you’ll get the charm, the neighborhood, and over time, you can still add those on-trend elements you may see in a brand-new home. And if you do, you’ll likely increase the home’s value too. An article from LendingTree explains:

“. . . they can personalize it and possibly increase its potential resale value with cosmetic upgrades . . . Plus, if a home comes with physical details or stories that add charm, in some cases, these elements are attractive enough to add to a home’s resale value . . .”

Want to see what’s available? Your real estate agent can show you what homes are for sale in your area, so you can see if there’s one that works for you and your needs.

Bottom Line

There are a lot of factors that go into deciding whether to buy an existing home or a newly built one after you sell, but it’s essential in today’s market to understand the opportunities you can find in both. Work with a local housing market professional so you have expert guidance as you explore the options in your area.

Mortgage Rates Down a Full Percent from Recent High

August 7, 2024/in Affordability, Economy, For Buyers, Mortgage Rates /by Bradley Mayhew

Mortgage rates have been one of the hottest topics in the housing market lately because of their impact on affordability. And if you’re someone who’s looking to make a move, you’ve probably been waiting eagerly for rates to come down for that very reason. Well, if the past few weeks are any indication, you may be getting your wish.

Mortgage Rates Trend Down in Recent Weeks

There’s big news for mortgage rates. After the latest reports on the economy, inflation, the unemployment rate, and the Federal Reserve’s recent comments, mortgage rates started dropping a bit. And according to Freddie Mac, they’re now at a level we haven’t seen since February. To help show the downward trend, check out the graph below:

Maybe you’re seeing this and wondering if you should ride the wave and see how low they’ll go. If that’s the case, here’s some important perspective. Remember, the record-low rates from the pandemic are a thing of the past. If you’re holding out hope to see a 3% mortgage rate again, you’re waiting for something experts agree won’t happen. As Greg McBride, Chief Financial Analyst at Bankrate, says:

“The hopes for lower interest rates need the reality check that ‘lower’ doesn’t mean we’re going back to 3% mortgage rates. . . the best we may be able to hope for over the next year is 5.5 to 6%.”

And with the decrease in recent weeks, you’ve got a big opportunity in front of you right now. It may be enough for you to want to jump back in.

The Relationship Between Rates and Demand

If you wait for mortgage rates to drop further, you might find yourself dealing with more competition as other buyers re-ignite their home searches too.

In the housing market, there’s generally a relationship between mortgage rates and buyer demand. Typically, the higher rates are, the lower buyer demand is. But when rates start to come down, things change. Buyers who were on the fence over higher rates will resume their searches. Here’s what that means for you. As a recent article from Bankrate says:

“If you’re ready to buy, now might be the time to strike. Home prices have been rising primarily because of a longstanding shortage of homes for sale. That’s unlikely to change, and if mortgage rates do fall below 6%, it’s possible buyers would enter the market en masse, further pushing up prices and resurrecting bidding wars.”

Bottom Line

If you’ve been waiting to make your move, the recent downward trend in mortgage rates may be enough to get you off the sidelines. Rates have hit their lowest point in months, and that gives you the opportunity to jump back in before all the other buyers do too.

If you’re ready and able to start the process, reach out to a local real estate professional to get started.

How Affordability and Remote Work Are Changing Where People Live

July 22, 2024/in Affordability, Buying Tips, For Buyers /by Bradley Mayhew

There’s an interesting trend happening in the housing market. People are increasingly moving to more affordable areas, and remote or hybrid work is helping them do it.

Consider Moving to a More Affordable Area

Today’s high mortgage rates combined with continually rising home prices mean it’s tough for a lot of people to afford a home right now. That’s why many interested buyers are moving to places where homes are less expensive, and the cost of living is lower. As Orphe Divounguy, Senior Economist at Zillow, explains:

“Housing affordability has always mattered . . . and you’re seeing it across the country. Housing affordability is reshaping migration trends.”

If you’re hoping to buy a home soon, it might make sense to broaden your search area to include places where homes that fit your needs are more affordable. That’s what a lot of other people are doing right now to find a home within their budget. Extra Space Storage explains:

“55% of American adults are looking to relocate to a different state or city for more affordable homes and lower costs of living. . . Specifically, states with a strong economy, lower costs of living, and remote work options continue to be the ideal places to live in the U.S.”

Remote Work Opens Up More Home Options

If you work remotely or drive into the office only a few times each week, you have many more possibilities when looking for your next home. That’s because you can cast a broader net and include more suburban or rural areas nearby. As Market Place Homes says:

“People start to reconsider where they want to live when commute times are slashed in half or eliminated altogether. If they have a longer commute but don’t have to do it daily, they may feel like they can tolerate living farther away from their job. Or, if someone works entirely remotely, they can move to a cheaper area and get a lot of house for their dollar.”

How a Real Estate Agent Can Help

A real estate agent can help you find the perfect home for your budget. They’re especially valuable if you’re moving to a new, unfamiliar area. Bankrate says:

“If you’re moving far away, you may not have a good idea about which neighborhoods or towns will be the best fit. An experienced local agent can help you find the lifestyle you’re looking for in a home you can afford.”

So, if you’re thinking about relocating to somewhere with more affordable homes, what are you waiting for? With the added flexibility of remote work, you might have more options than before.

Bottom Line

Dreaming of a place where your money goes further? Connect with a real estate agent so you have someone to help you find your next home. Together, you’ll make your dream of homeownership a reality.

More Than a House: The Emotional Benefits of Homeownership

June 3, 2024/in Affordability, For Buyers /by Bradley Mayhew

With all the headlines and talk about housing affordability, it can be tempting to get lost in the financial side of buying a home. That’s only natural as you think about the dollars and cents of it all.

And while you ultimately need to be able to afford a home you buy, don’t lose sight of why homeownership was so important to you in the first place. That’s because buying a home is so much more than just a financial transaction. As the National Association of Realtors (NAR) says:

“The benefits of purchasing and owning your place of residence are both financial and emotional – pride in homeownership and the feeling of security are huge intangible benefits.”

Here’s a look at just a few of those more emotional or lifestyle perks, to help anchor you to why homeownership is one of your goals.

A Sense of Satisfaction

Owning a home is often associated with better mental health and well-being. That’s probably because buying a home is a big milestone. And the sense of satisfaction and pride that comes with achieving that goal just feels good. A recent article from the Mortgage Reports says:

“By and large, homeownership brings more satisfaction than renting. . . Surveyees scored the overall happiness level of homeowners at 88% compared to 67% for renters.”

More Stability for Your Family

Another thing that may make homeowners feel more satisfied is that they’re finally able to put down roots. Think about it. If you’re used to moving each time your lease renews and your rent climbs, staying put for a while would be nice not just for you, but for any loved ones that live with you.

A home can provide more predictability and the chance to make long-term friends. That should reduce everyone’s stress too. As NAR explains:

“Families also benefit from homeownership, with studies proving that parents are able to spend less time in a stressed state, therefore spending more time with their children. The ability for parents to feel stable has a huge impact on children’s behavioral issues, educational success, and future economic success.”

A Stronger Feeling of Community

And if you’re also looking for a sense of belonging for yourself, homeownership can help with that too. As FinHabits says:

“Homeowners tend to be more involved in their local communities, leading to a stronger sense of belonging . . .”

It makes sense. Your home connects you to your neighborhood and, by extension, your broader community. That’s because owning a home gives you a stake in that community’s future. So, becoming more involved and wanting to do what you can to help improve the area while making long-term relationships with neighbors is only natural.

The Ability To Make the Space Your Own

And don’t forget, your home is a place that’s all yours. Unless you’ve got specific homeowner’s association requirements, you’re free to customize it however you see fit.

So, if renting has been cramping your style, it’s time to express yourself and jump on the latest trends (if you want to). Whether that’s small home improvements or full-on renovations, your house can be exactly what you want and need it to be. And as your tastes and lifestyle change, so can your home. Picture coming home each day to a place that feels like you. That’s a feeling like no other.

Bottom Line

If you want to enjoy a sense of accomplishment and pride in where you’re living, connect with a real estate agent to go over what you need to do now to make this future happen for you.

Equity Can Make Your Move Possible When Affordability Is Tight [INFOGRAPHIC]

April 26, 2024/in Affordability, Equity, Infographics, Move-Up /by Bradley Mayhew

Some Highlights

Did you know the equity you have in your current house can help make your move possible?
Once you sell, you can use it for a larger down payment on your next home, so you’re borrowing less. Or, you may even have enough to be an all-cash buyer.
The typical homeowner has $298,000 in equity. If you want to find out how much you have, connect with a local real estate agent for a Professional Equity Assessment Report.

Is It Getting More Affordable To Buy a Home?

April 18, 2024/in Affordability, For Buyers /by Bradley Mayhew

Over the past year or so, a lot of people have been talking about how tough it is to buy a home. And while there’s no arguing affordability is still tight, there are signs it’s starting to get a bit better and may improve even more throughout the year. Elijah de la Campa, Senior Economist at Redfin, says:

“We’re slowly climbing our way out of an affordability hole, but we have a long way to go. Rates have come down from their peak and are expected to fall again by the end of the year, which should make homebuying a little more affordable and incentivize buyers to come off the sidelines.”

Here’s a look at the latest data for the three biggest factors that affect home affordability: mortgage rates, home prices, and wages.

1. Mortgage Rates

Mortgage rates have been volatile this year – bouncing around in the upper 6% to low 7% range. That’s still quite a bit higher than where they were a couple of years ago. But there is a sliver of good news.

Despite the recent volatility, rates are still lower than they were last fall when they reached nearly 8%. On top of that, most experts still think they’ll come down some over the course of the year. A recent article from Bright MLS explains:

“Expect rates to come down in the second half of 2024 but remain above 6% this year. Even a modest drop in rates will bring both more buyers and more sellers into the market.”

Any drop in rates can make a difference for you. When rates go down, you can afford the home you really want more easily because your monthly payment would be lower.

2. Home Prices

The second big factor to think about is home prices. Most experts project they’ll keep going up this year, but at a more normal pace. That’s because there are more homes on the market this year, but still not enough for everyone who wants to buy one. The graph below shows the latest 2024 home price forecasts from seven different organizations:

These forecasts are actually good news for you because it means the prices aren’t likely to shoot up sky high like they did during the pandemic. That doesn’t mean they’re going to fall – they’ll just rise at a slower pace.

3. Wages

One factor helping affordability right now is the fact that wages are rising. The graph below uses data from the Federal Reserve to show how wages have been growing over time:

Check out the blue dotted line. That shows how wages typically rise. If you look at the right side of the graph, you’ll see wages are climbing even faster than normal right now.

Here’s how this helps you. If your income has increased, it’s easier to afford a home because you don’t have to spend as big of a percentage of your paycheck on your monthly mortgage payment.

Bottom Line

If you stack these factors up, you’ll see mortgage rates are still projected to come down a bit later this year, home prices are going up at a more moderate pace, and wages are growing quicker than normal. Those trends are a good sign for your ability to afford a home.