Affordability is decreasing - what does this mean for the market?
It is no secret that inventory shortages have been shaking the real estate market. There is a scarcity of homes for sale at the moment, at a time when wages are good and people are looking to buy. Unfortunately, it seems as if some buyers may have to wait a bit longer, as the shortages have caused home prices to skyrocket.
According to researchers at Arch Mortgage Insurance, affordability of homes, in congruence with the prices of monthly mortgage payments, have been decreasing at a quicker rate than it has in the past quarter century.
The market is hitting a series of roadblocks at the moment – mortgage rates and home prices are rising due to the income shortage, and high demand is only making the situation worse. Home prices are rising far faster than income growth can keep up with, and this is hurting the real estate market more than most of us have ever seen.
The median percentage of average mortgage payment has increased 5% since 2018 began, and it is predicted that it may increase yet another 10% or 15% by the end of the year, in addition to the 5% on the 30-year fixed mortgage rates.
While this has certainly put a damper on the current real estate market, history has shown that as rising prices may cause a lag in sales, the market will eventually reach a breaking point where prices stall and inventory may become a bit more affordable.
It is predicted that this increase in prices should begin to ease by next year, most likely around the same time that inventory begins to increase a bit. It is unfortunate that it may still take several months to reach that point, but until then, it is best to keep a watchful eye on the market and try to conduct business accordingly.