As numbers, interest rates and financial terms like “affordability” continue to populate housing news in 2023, more and more consumers are wondering when the dust will settle and a degree of normalcy will emerge. As of December 2022, a report was issued noting that 62.7% of average household income was needed to cover home ownership costs.
This figure, according to RBC, signified the worst level on record, despite staggering and much more grim percentages in Vancouver and Toronto, where 95.8% and 85.2% of income were required to sustain home ownership.
Many financial experts attribute this affordability crunch to soaring home prices as the world surfaced from the pandemic combined with a series of unexpected interest hikes to tame a fast-rising inflation rate. This perfect storm of market fluctuating activity impacted those seeking a mortgage, and of course, influenced the ability for many to qualify for one.
Unfortunately, household incomes are not keeping pace with rising rates, which translates into a daunting reality – home ownership has become unreachable for many.
However, is there hope on the horizon? Home prices have been sliding since interest rates have been rising, which places the housing market at the final stages of a much needed “price correction.” The benchmark price for a home has fallen 14% from its peak (Spring 2022), and with a predicted pause in the rise of interest rates, there should be some relief from the affordability crunch. Also, household income levels are expected to rise, giving potential homebuyers more purchasing power at better price points.
Now, more than ever, it is imperative to find a trusted REALTOR and mortgage broker to navigate this transitional period in real estate. If purchased correctly, a home can remain a home, maintaining all of its essential values and benefits, minus the burden of carrying it.
