After the big question of, Should I buy a home right now?comes the follow-up, ‘Can I afford a home right now?

With headlines switching back and forth between ‘Housing Crash’ and ‘Homes aren’t Affordable,’ it’s no wonder consumers feel completely frenzied:

Headlines are meant to lure people in, and often this is accomplished by creating fear. This problem is, most people don’t actually read the full story or analyze the numbers, so they are left with the impression of the scary headlines. 

This is where your work to educate comes as a real estate professional. 

Housing Affordability

Housing inventory increased by 18.7% in June 2022, compared to 2021. While this shows the market is in correction mode, inventory is down 34.1% compared to 2020 and drops even further – a decrease of 53.2% – when compared to June 2019. 

So while we can celebrate the fact that more homes are coming to the market – giving buyers more opportunities to secure a deal – many properties are still going at or above the list price. 

Current home values and rising mortgage rates mean it is more expensive to buy a home. ATTOM’s Q2 2022 U.S. Home Affordability Report shows that single-family homes and condos are currently less affordable when compared to historical averages. The question every hopeful buyer wants to know is: How much more expensive?

Lending standards consider a home affordable if 28% or less of wages are going to major monthly homeownership expenses (mortgage, property tax, insurance). When you factor in median home prices, current mortgage rates, and the average wage of $67,587 in the U.S., the ATTOM report shows that percentage has increased to 31.5% – the highest point since Q2 2007. 

Renters’ Nation

As it becomes more expensive to buy a home, more people feel like they will be stuck renting forever. But this renters’ nation is also getting more expensive:

And when you compare homeownership to renting, homeownership remains the more affordable option of the two. 

Help your Clients Understand the Numbers

Buying a home will always be an individualized decision. So while looking at the median and average numbers can tell us a lot about the housing market, it doesn’t give a full picture for every hopeful buyer. 

Here is how you can work with your clients to make sure they are making informed decisions based on their current situation:

  1. Understand their motivation. The first step is to fully understand the needs of your client. What is the reason for moving?
  2. Connect them with a reputable lender. A true professional won’t just give your client their max budget – they will help each buyer fully understand their finances. 
  3. Discuss monthly numbers. Even with the right mortgage lender, it’s essential to talk numbers. Former Zillow executive and Tomo founder Greg Schwartz recommends breaking down mortgage rate increases into monthly impact for homeowners.
  4. Create a plan. If your clients are ready and able to purchase a home, help them understand the process of making a competitive offer. For those unable to afford a home, help them create a plan so they can buy in the future.

Whether a consumer is ready to buy today or needs to wait a year – there are conversations to be had with everyone considering homeownership. How many of these conversations are you having daily?