Key Items That Influence Affordability

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These days you can’t discuss residential real estate without commenting on the affordability challenges that today’s buyers face. There’s no question that homes are less affordable today than they were over the last two years, but that doesn’t mean homes are now truly unaffordable. There are three measures used to establish home affordability which include home prices, mortgage rates, and wages. Here is a closer look at each of these components.

Home Prices

The most recent Home Price Insights report provided by CoreLogic indicates that home values have increased by 19.1% from last January of 2021 to January this year. That was one reason affordability had declined over the past year.

Mortgage Rates

While the current global uncertainty makes it difficult to project home loan rates, we do know current rates are almost one full percentage point higher than they were at this time last year. According to Freddie Mac, the average monthly rate for last February was 2.81% where this February it was 3.76%. That increase in the mortgage rate also contributes to homes being less affordable than they were last year.

Wages

The one big and positive component in the affordability equation is an increase in American wages. In a recent article by RealtyTrac, Peter Miller addresses that point:

“Prices are up, but what about wages? ADP reports that job holder incomes increased 5.9% last year but rose 8.0% for those who switched employers. In effect, some of the higher cost to buy a home has been offset by more cash income.”

The National Association of Realtors (NAR) also recently released some data that examines income and affordability. The NAR report provides a comparison of the current median family income versus the qualifying income for a median-priced home in each region of the country. While the figures may range in certain locations within each region, it’s important to note that it was found that in most of the country, homes are still affordable.

In the end when you think about affordability you must remember that the picture includes more than just home prices and mortgage rates. While they do have a significant impact, wages need to be factored into affordability as well. Because wages have been rising, they’re a big reason that, while less affordable to say two years ago, homes are not unaffordable today.

Beth Dickerson

Boston, MA

Primary phone
(617) 510-8565
Email
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Address
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Boston, MA 02116

About The Author

One of Boston’s most reputable real estate brokers, Beth Dickerson has achieved more than $2 billion in sales and thousands of successful real estate transactions over her nearly thirty-year tenure. Beth has received national acclaim from the real estate industry and represents some of the most prestigious residents and properties across Massachusetts. Her enduring record as a top producer comes from the intuitive gift of sensing her clients’ needs. She has built a business that is referral-based at its core—a testament to her relationship-driven approach and penchant for exceeding expectations. It is this nuanced expertise that Beth leverages to guide many of her clients-turned-friends through some of the greatest milestones of their lives.

Beth was the proprietor of her own real estate company before joining the residential division of R. M. Bradley in 1993, where she was a top producer for more than a decade. In 2003, she founded her own boutique real estate firm, Dickerson Real Estate, before merging with Gibson Sotheby’s International Realty in 2007. Today, Beth attributes her success to her comprehensive marketing and advertising strategies, exclusive contact network, and unparalleled insight into neighborhoods like Back Bay, Beacon Hill, the South End and Waterfront. With an understanding that no two clients are alike, she works with clients in all phases of life—from first-time buyers to luxury developers, seasoned sellers and beyond. Beth offers clients the resources to aggressively market their property locally, nationally and globally, and her attention to detail, drive and enthusiasm are unmatched.

Beth has appeared in prestigious media outlets including The Wall Street Journal, Mansion Global, The Boston Globe, and Boston magazine, and was prominently featured as Greater Boston’s real estate expert on WCVB Chronicle in 2020. She has had the honor of serving as President of the Downtown Council of the Greater Boston Real Estate Board. For over ten years, she has been a Co-Chair and Committee Member for the Massachusetts General Pediatric Hospital for Children’s Storybook Ball. She serves as a Board Member of the Community Music Center of Boston and a member for the Perkins School for the Blind, Emerald Necklace Park Conservancy, Justine Liff Luncheon, Youth Villages and the Boys & Girls Club of Boston, among dozens of other organizations throughout the Boston area.

A long-time resident of Boston’s Back Bay, Beth was an active member of the community as she raised her two children: she served as treasurer of the Clarendon Street Playground and was an avid supporter of the Hill House Community Center.