These are the Key Factors That Impact Affordability Today When Buying a Home in Roanoke, VA
When it comes to home affordability in Roanoke, VA, there’s good news and bad news. The good news is that, according to the latest report from the National Association of Realtors (NAR), the percentage of income needed to buy a median-priced home is lower than it has been in nearly two years. The bad news is that home prices have been increasing faster than wages over the same period.
So what does this mean for potential buyers in Roanoke? Here are three key factors to consider:
1. Home Prices
The most recent Home Price Insights report by CoreLogic shows home values have increased by 19.1% from last January to this January. That was one reason affordability declined over the past year. According to NAR’s report, the median price of a home in Roanoke, VA was $174,900 in March 2018. While this is lower than the national median of $225,000, it is still out of reach for many buyers.
2. Mortgage Rates
While the current global uncertainty makes it difficult to project mortgage rates, we do know current rates are almost one full percentage point higher than they were last year. According to Freddie Mac, the average monthly rate for last February was 2.81%. This February it was 3.76%. That increase in the mortgage rate also contributes to homes being less affordable than they were last year.
The one big, 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 information that looks at income and affordability. The NAR data provides a comparison of the current median family income versus the qualifying income for a median-priced home in each region of the country. Here’s a graph of their findings:
As the graph shows, the median family income (shown in blue on the graph) is greater than the qualifying income needed to buy a median-priced home (shown in green on the graph) in all four regions of the country. While those figures may vary in certain locations within each region, it’s important to note that, in most of the country, homes are still affordable.
So, when you think about affordability in Roanoke, VA, remember that the picture includes more than just home prices and mortgage rates. When prices rise and rates rise, it does impact affordability, and experts project both of those things will climb in the months ahead. That’s why it’s less affordable to buy a home than it was over the past two years when prices and rates were lower than they are today. But wages need to be factored into affordability as well. Because wages have been rising, they’re a big reason that, while less affordable, homes are not unaffordable today.
The average wage in Roanoke was $41,780 in 2016. This means that to afford the median-priced home, a buyer would need to make $86,620 per year—which is more than the average wage.
So what can you do if you want to buy a home in Roanoke but don’t make enough money?
Here are a few options:
1. Save up for a larger down payment: If you can afford to save up for a larger down payment, you may be able to get a lower interest rate and reduce your monthly mortgage payment.
2. Consider buying a less expensive home: If you can’t afford the median-priced home in Roanoke, consider looking at homes that are priced lower.
3. Rent until you can afford to buy: If you don’t want to wait to buy a home, you could rent an apartment or house in Roanoke until you can afford to buy one.
The key takeaway is that home affordability in Roanoke, VA varies depending on your income, housing prices, and mortgage rates. So it’s important to carefully consider all of these factors before making a decision about whether or not to buy a home.
To find out more about affordability in our local area, let’s discuss where home prices are in the Roanoke area, what’s happening with mortgage rates, and get you in contact with a lender so you can make an informed financial decision. Remember, while less affordable, homes are not unaffordable, which still gives you an opportunity to buy today.
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