3 Key Factors Affecting Kansas City Home Affordability
Many Kansas City buyers have been concerned about housing affordability and how tight it's become over the past year. The housing market has recently witnessed some relief in this area, as Kansas City mortgage rates have decreased since their most recent peak in October. However, there's more to being able to afford a home than just mortgage rates.
Home affordability can be understood by examining three significant factors: mortgage rates, home prices, and wages. Let's dive into the latest data on each one to see why affordability is improving.
Kansas City mortgage rates have lowered in recent months, with the majority of real estate experts expecting them to decline further over the year. Jiayi Xu, an economist at Realtor.com, explains:
"While there could be some fluctuations in the path forward … the general expectation is that mortgage rates will continue to trend downward, as long as the economy continues to see progress on inflation."
The slightest change in mortgage rates can significantly impact your purchasing power, making it easier to afford the home you want through lower monthly mortgage payments.
The second important factor to consider is KC home prices. These prices rose at a relatively normal pace last year. They are expected to continue this trend in 2024. Why? Even with Kansas City inventory projected to grow slightly this year, the supply of homes for sale is still lower than the number of interested buyers. According to Lisa Sturtevant, Chief Economist at Bright MLS:
"More inventory will be generally offset by more buyers in the market. As a result, it is expected that, overall, the median home price in the U.S. will grow modestly . . ."
The great news is that Kansas City home prices aren't likely to skyrocket as they did during the pandemic, but this trend also means it'll likely cost you more to wait. Are you ready, willing, and able to purchase a KC home? The Just Say Home KC Team can help you find the right home and seal the deal before more buyers enter the market and prices rise.
Rising income is currently another positive factor in affordability. The graph below uses data from the Federal Reserve to show how wages have grown over time:
The blue dotted trendline displays the rate at which wages typically rise. On the right side of the graph, wages are above the trend line, meaning they're increasing at a higher rate than average right now.
How do higher wages improve affordability? They reduce the percentage of income it takes to pay your mortgage because less of your paycheck is put toward your monthly housing costs.
What Does This Mean for You?
Home affordability depends on three things: mortgage rates, home prices, and wages. The good news: they're moving in a positive direction for Kansas City buyers.
Are you thinking about purchasing a Kansas City home in the near future? The three main factors impacting affordability are improving. The Just Say Home KC real estate experts can clarify current Kansas City housing market data and what this means for you as an interested buyer!