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Home Affordability: Understanding the Factors that Affect it

April 11, 2023 by Kevin Martini

As we navigate the real estate market, home affordability is a significant concern for many individuals and families. In recent years, the headlines have caused alarm, leading to a misunderstanding of the actual situation. Additionally, the associated articles often fall short in providing clarity, as they tend to leave out critical information that provides a complete picture.

In 2022, several news stories predicted a steep drop of 20% in home prices. However, this did not come to pass, as the analysts failed to grasp the intricacies of home affordability. It is essential to have a thorough understanding of the factors that constitute home affordability to make sound decisions regarding real estate investments.

At its core, home affordability is determined by three primary factors: home prices, wages, and mortgage rates. These factors play a crucial role in determining whether an individual or family can afford to purchase a home. In this article, we will delve deeper into these factors and explore how they affect home affordability.

Home Prices

Home prices refer to the cost of homes, which can vary depending on several factors such as location, size, age, and amenities. In many cases, the demand for housing in a particular area drives up home prices. Increasing the supply of housing through new construction can help reduce the cost of homes and make homeownership more accessible.

It is worth noting that lowering home prices is not the only solution for making homes more affordable. In some cases, lower home prices can result in lower quality homes, which can lead to additional costs down the line. Instead, increasing the supply of housing through new construction can help reduce home prices without sacrificing quality.

Wages

Wages are another critical factor in home affordability. If wages are not increasing at the same rate as home prices, it can be challenging for individuals and families to afford a home. In recent years, wages have not kept up with the rising cost of living, which has made homeownership more difficult for many people.

An increase in wages can have a positive impact on home affordability. It can make it easier for individuals and families to purchase a home and reduce the financial strain that comes with homeownership. Employers can play a significant role in improving wages and, in turn, making homeownership more accessible to their employees.

Mortgage Rates

Mortgage rates are a significant factor in home affordability. The interest rate on a mortgage loan has a significant impact on the overall cost of homeownership. Lower mortgage rates can make it easier for individuals and families to purchase a home, while higher mortgage rates can increase the monthly payment and make homeownership more challenging to achieve.

It is worth noting that higher mortgage rates do not necessarily mean homes are unaffordable. Instead, it is crucial to consider all three factors when assessing home affordability. Lowering home prices alone may not be enough to make homeownership more accessible. An increase in wages and lower mortgage rates can also have a significant impact on home affordability.

National Association of Realtors’ Housing Affordability Index

The National Association of Realtors has an index called the Housing Affordability Index. The index indicates whether families can qualify for a mortgage loan on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.

In January 2023, the index was at 104.9, indicating that more families can qualify for a mortgage loan on a median-priced home. This is a positive sign for those looking to purchase a home, as it suggests that homeownership may be more accessible than in previous years.

The Impact of Increasing Demand

Despite the challenges that come with homeownership, many individuals still see it as a crucial part of achieving financial stability and building wealth. As such, demand for homes remains high, which can impact home affordability.

According to a Nerd Wallet survey called the 2023 Home Buyer Report, 28 million Americans plan to purchase a home in the next 12 months. This is a significant number and highlights the pent-up demand for homeownership. To put it in perspective, only under 6 million homes sold last year. This demand for homes, combined with the current state of home affordability, is likely to drive up home prices, making it even more challenging for some individuals and families to purchase a home.

However, it is worth noting that every time mortgage rates decline by 1%, 5 million more renters are able to afford a home to purchase. This means that even with high demand, lowering mortgage rates can make homeownership more accessible to a broader range of people.

Real Estate Market: The Calm Before the Storm?

Despite the headlines in 2022 predicting a steep drop in home prices, the real estate market has remained relatively stable. According to the Case-Shiller 20-city composite index, year-over-year appreciation in January 2023 was at 3.8%, indicating that home prices did not experience the drastic drop that some analysts had predicted.

While four of the 20 cities did see declines, and 16 of the 20 cities saw an increase, the cities with a decline were all on the west coast of the U.S. and this is because of the slowdown in the tech sector which is so prevalent in those markets. In January 2023, month-over-month data showed a decline of negative 0.2 percent, but this is not significant as it is only two-tenths of a percent.

It is essential to note that the real estate market is not just local; it is hyperlocal. While the national picture is positive, it is important to consider the local market when assessing the state of the real estate market. Factors such as the job market, the economy, and population growth can all impact the local real estate market and, in turn, home affordability.

Understanding the factors that affect home affordability is crucial for individuals and families looking to purchase a home. The three primary factors that constitute home affordability are home prices, wages, and mortgage rates. Lowering home prices is not the only solution for making homes more affordable, and an increase in wages can have a positive impact on home affordability. It is crucial to consider all three factors when assessing home affordability.

Despite the challenges that come with homeownership, many individuals still see it as a crucial part of achieving financial stability and building wealth. With pent-up demand for homeownership, the real estate market is likely to experience a surge in home sales in the coming years. This demand, combined with the current state of home affordability, is likely to drive up home prices, making it even more challenging for some individuals and families to purchase a home.

certified mortgage advisor kevin martini

kevin martini best raleigh mortgage broker

The Ultimate Home Buying and Mortgage Guide: Martini Buyer Guide Spring 2023 Edition | Martini Mortgage Group

March 7, 2023 by Kevin Martini

If you’re in the market to purchase a home, whether for the first time or not, there are several crucial factors to consider before you make your purchase. The process can be overwhelming and confusing, but fortunately, Kevin Martini, a certified mortgage advisor and Raleigh mortgage broker, along with Logan Martini, a senior mortgage strategist, have created the Martini Buyer Guide, the ultimate home buying and mortgage resource.

The Spring 2023 edition of the Martini Buyer Guide was created to provide a straightforward explanation of the current real estate and mortgage markets. It features informative articles that address crucial aspects of home buying and mortgage application processes, and it’s the perfect guide for anyone who wants to stay up-to-date on what’s happening in the real estate market.

The Martini Mortgage Group’s Guide to Buying a Home and Getting a Mortgage

The Spring 2023 Martini Buyer Guide was curated to simply explain what is going on in the real estate and mortgage markets.
Senior Mortgage Strategist and Raleigh Mortgage Broker Logan Martini

the ultimate home buying and mortgage guide martini buyer guide spring 2023 edition martini mortgage group

A Glimpse of some Content of the Ultimate Home Buying and Mortgage Guide

What’s Happening in the Housing Market?

The housing market is continuously changing, and it’s essential to keep up with the latest trends, particularly if you’re planning to buy a home this spring. Two critical points to consider are Raleigh mortgage rates and home prices. The Martini Buyer Guide’s article, which starts on page 3, provides more details on these two essential factors.

Using the 4 Stages of Homebuyer Demand to YOUR Benefit

To make the most of your home-buying experience, you need to understand the 4 stages of buyer demand. The Martini Buyer Guide’s article, which starts on page 6, explains these stages and provides insights on how to use them to your advantage. If you want to learn more about this topic, tune in to episode 173 of the Martini Mortgage Podcast, available on all streaming services.

How the Supply of Homes For Sale is Changing

One of the biggest challenges in the housing market today is the low number of homes for sale. However, there are more options available now than there were at this time last year. The Martini Buyer Guide’s article, which starts on page 7, explains what this means for homebuyers.

What Past Recessions Tell Us About the Housing Market and Raleigh Mortgage Rates

Many people are wondering what a recession could mean for home values and mortgage rates. The Martini Buyer Guide’s article, which starts on page 11, provides insights into what past recessions tell us about the housing market and Raleigh mortgage rates.

First-Time Homebuyer Tax Credit

If you’re a first-time homebuyer in North Carolina, you may be eligible to save up to $2,000 a year with the Mortgage Credit Certificate (MCC) offered by the Martini Mortgage Group in partnership with North Carolina Housing and Finance Agency (NCHFA). This tax credit is not just for the first year; it’s up to $2,000 every year as long as the home remains your primary residence.

5 Traps to Avoid When Buying A Home

Buying a home is a significant investment, and it’s important to avoid common mistakes that could cost you in the long run. The Martini Buyer Guide’s article, which starts on page 19 of the Spring 2023 edition, provides valuable insights on five traps to avoid when buying a home.

Things to Avoid After Applying for a Mortgage

Once you’ve found the right home and applied for a mortgage, there are specific things you should avoid doing before closing on your home. Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. The Martini Buyer Guide’s article, which starts on page 24, provides more information on what to avoid after applying for a mortgage.

Martini Buyer Guide | Spring 2023 Edition

The-Ultimate-Home-Buying-and-Mortgage-Guide-Martini-Buyer-Guide-Spring-2023-Edition-Martini-Mortgage-Group Download

Let’s Connect

I’m sure you have questions and thoughts about securing the proper mortgage with the lowest cost of borrowing and real estate process. We’d love to talk with you about what you’ve read in the Spring 2023 Edition of the Martini Buyer Guide and help you on the path to buying your new home. Our number is (919) 238-4934 and we look forward to working with you.

Logan Martini

Senior Mortgage Strategist | NMLS 1591485

[email protected]

Kevin Martini

Certified Mortgage Advisor | NMLS 143962

[email protected]

Homeownership More Accessible and Affordable in Raleigh with New FHA Mortgage Insurance Premium

February 23, 2023 by Kevin Martini

Are you in the market for a new home but worried about the cost of mortgage insurance? Well, we’ve got some excellent news for you! The Federal Housing Administration (FHA) has announced a 30 basis point reduction in their mortgage insurance premiums, providing some much-needed relief to homebuyers across the country.

In this special article, Raleigh mortgage broker and Certified Mortgage Advisor Kevin Martini explores the implications of this change and offering valuable insights into what it could mean for both current and future homebuyers, as well as the housing market.

For those who are not familiar with mortgage insurance, it is an insurance policy that protects lenders in case a borrower defaults on their loan. If a borrower defaults, the lender can file a claim with the mortgage insurer to recoup their losses. Mortgage insurance is typically required for borrowers who put down less than 20% on their home purchase, as they are considered to be at a higher risk of default.

FHA loans are designed to help first-time and repeat homebuyers plus those with lower credit scores or smaller down payments qualify for a mortgage. These loans are backed by the Federal Housing Administration and offer several benefits to borrowers, including lower down payment requirements and more relaxed credit score standards. However, they also require borrowers to pay mortgage insurance premiums.

The recent FHA announcement on February 22, 2023 by the FHA to reduce their mortgage insurance premiums by 30 basis points, effective on March 20, 2023, could result in significant savings for FHA borrowers. For example, a borrower with a $200,000 FHA loan who puts down 3.5% could save over $50 per month on their mortgage insurance premiums. Over the life of the loan, this could add up to thousands of dollars in savings.

This reduction in mortgage insurance premiums could make homeownership more accessible and affordable for first-time homebuyers or those with lower incomes who may struggle to afford a larger down payment. Additionally, this change could have positive implications for the overall housing market. By reducing the cost of homeownership, more people may be encouraged to enter the market, leading to increased demand and higher home values.

The Martini Mortgage Group can help you find the right mortgage for your unique situation. Since a FHA loan is not the only option that offers a low down payment, it can be overwhelming to know where to start. Our Raleigh based mortgage strategists are here to guide you through the process, answer all your questions, and ensure that you feel confident and informed every step of the way.

If you’re ready to explore your options and find the perfect mortgage for you, give us a call today. With our expertise and experience, we’ll help you achieve your dream of owning your own home while also saving you money with the reduced mortgage insurance premiums offered by the FHA.