The past couple of years have been challenging for many North County San Diego homebuyers. With soaring prices and increasing competition, securing a home has been tough. However, there’s a glimmer of hope on the horizon. While affordability is still a significant hurdle, recent trends suggest a potential shift. The housing market seems to be cooling down slightly, and there’s optimism that conditions could continue to improve 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 partly improved because of recent economic, employment, and inflation data. Moving forward, some rate volatility is to be expected. However, 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%.
Naturally, you may be wondering, “How much can I afford?” Determining your budget is crucial when planning your homeownership journey. Our free tool can help you gain clarity and take the next step toward your North County dream home – Click here.
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.”
Curious about your North County San Diego home’s value? Discover its worth with our free home valuation tool. Unlock insights to make informed real estate decisions – Click here.
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 we consider these factors together – declining mortgage rates, slower home price appreciation, and faster wage growth – it’s clear that the North County San Diego housing market is shifting. While affordability challenges persist, these trends indicate potential improvements. Shafran Realty Group is closely monitoring these developments to help buyers navigate this evolving market and find their dream homes.