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What factors are driving up home prices?
Home prices have surged by 50% since 2019, driven by a combination of high demand and limited supply. The pandemic has shifted housing preferences, leading many buyers to seek homes in suburban and rural areas, further increasing competition. Additionally, stagnant wage growth has not kept pace with rising prices, making it difficult for buyers to afford homes.
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How do rising interest rates affect first-time buyers?
Rising interest rates significantly impact first-time buyers by increasing monthly mortgage payments. Currently, mortgage rates are around 6.81%, which, despite a slight decrease, still dampens buyer interest. Higher rates mean that buyers must allocate a larger portion of their income to housing, exacerbating the affordability crisis.
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What is the current state of homebuyer affordability?
As of 2025, first-time homebuyers are spending an alarming 58% of their income on mortgage payments, up from 30% in 2019. This dramatic increase highlights the growing affordability gap and poses a significant challenge for those looking to enter the housing market.
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Which areas are most affected by the affordability crisis?
States like California and Montana are particularly affected, with home prices projected to rise significantly by 2030. These areas are experiencing heightened demand, making it increasingly difficult for first-time buyers to find affordable options.
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What can potential buyers do to improve their chances of affording a home?
Potential buyers can improve their chances by exploring various financing options, such as government programs designed for first-time buyers. Additionally, saving for a larger down payment and considering homes in less competitive markets can help mitigate some of the affordability challenges.