Homeownership Month: Can You Still Afford the American Dream?
Welcome to National Homeownership Month! Owning a home has been a part of the American Dream for decades—but can people still afford it? Many buyers in today’s market are apprehensive about the price tag of homes and are wondering if it's worth the cost.
Luckily, the Janice Burtis Team is here to break it down. First—what are the factors that affect home affordability? And second—a few reasons why homeownership will always benefit you and your family.
Let’s dig in!
Breaking down home affordability – what are the key factors?
Many people in today’s market are discussing the trials of home affordability. But what are the key components that have affected today’s buyer pool? Here are the three main contributors:
Mortgage Rates
One of the greatest factors affecting home affordability is today’s mortgage rates. We know this has been a sore subject for some time, but rates are a crucial element that affects a buyer’s mortgage payment. When mortgage rates are low, it becomes easier for potential homebuyers to afford the homes they desire. This is because lower mortgage rates result in reduced monthly mortgage payments, making homeownership more accessible and financially feasible for many individuals and families.
Home Prices
The next greatest factor is home prices, which can be directly linked to housing inventory. When there's a limited supply of homes on the market and high demand from buyers, home prices tend to rise. After going up at a relatively normal pace in 2023, they’re expected to continue rising moderately through the rest of the year. That’s because even with inventory projected to grow slightly this year, there still aren’t enough homes for sale for all the people who want to buy them.
Wages & The Job Market
And the final main ingredient for real estate affordability? The state of the job market. It can be difficult to afford a home when wages and employment opportunities are low. Higher wages allow potential homebuyers to qualify for larger mortgages and afford homes at higher price points. However, economic downturns or stagnant wage growth can limit affordability, particularly in areas with high costs of living, making it more challenging for individuals and families to purchase homes that meet their needs.
What are the benefits of homeownership?
Despite the ebb and flow of home affordability, there’s a reason why owning a home is considered part of the “American Dream.” Not only do you have the benefit of owning your own slice of heaven, but there are plenty of other reasons to purchase a home:
An Investment Opportunity
Owning a home is widely regarded as a great investment, serving as a hedge against inflation compared to other types of investments. Unlike assets that may depreciate over time—such as vehicles or certain financial instruments—real estate does the opposite and can appreciate in value over the long term. Additionally, real estate investments often offer tax advantages and potential rental income.
Improve Net Worth
Homeownership is a great way to build your personal net worth. As homeowners pay down their mortgage and property values appreciate, their equity in the home increases and will lead to a higher net worth. The best part? This equity can be leveraged for various financial purposes such as: funding education, starting a business, or saving for retirement.
Build Generational Wealth
Something else many homeowners consider is contributing to their generational wealth. By owning a home and steadily building equity over time, homeowners can pass down valuable assets to future generations. This legacy not only provides financial stability and security for your future family but also serves as a way to provide for your loved ones long after you’re gone.
How can you build generational wealth through homeownership? It's important to maintain the property, make strategic home improvements that increase its value, and establish a financial plan to preserve and grow the asset's value over time.
At the end of the day, even if you’re questioning affordability, remember the reasons why you want to become a homeowner in the first place. Whether that’s to have a space of your own or to establish a home base for your family—the benefits are unique to you.
If you have questions about the state of the market and don’t know how much home you can afford, reach out to the Janice Burtis Team to learn more about the home-buying process. We’d be happy to answer any of your questions and guide you toward the American Dream!
