According to a study by Zillow, home prices have risen 42% since 2020 and average homebuyers would need to earn 80% more at that time to afford a home. Currently, prospective homebuyers are having to juggle more cost pressures as they navigate the real estate market.

Yahoo Finance Personal Finance Editor Molly Moorhead joins Wealth! to discuss inflation's influence on rising home prices as the Federal Reserve considers interest rate cuts, outlining advice for buyers on their homebuying journey.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

BRAD SMITH: Well, for many Americans, home ownership is seeming more and more out of reach. According to new analysis from Zillow, home prices have jumped 42% since 2020, but the average person needs to earn 80% more than they did at that time in order to comfortably afford a home in today's market.

So why are homes becoming less and less affordable? That's the big question. Here with the latest, we've got our very own, Molly Moorhead. Molly, what's going on here and why is it so hard to be able to afford a home right now?

MOLLY MOORHEAD: Hey, Brad. So in addition to that increase in home prices, which 42% is not nothing, inflation has been on the rise since the pandemic and interest rates have followed. And so that means the cost of financing a home is so much more than it was four years ago. If you look at the average rate on a 30-year loan in March of 2020, it was 3 and 1/2%. Today, it's around 6.8, 6.9, and so it's this double whammy of higher home prices and higher financing costs.

BRAD SMITH: So what advice do you have for prospective homebuyers out there right now?

MOLLY MOORHEAD: Yeah. Well, it's not easy. This is a tough market. But a couple of things you can do are number one, watch the Fed. A lot of economists, market watchers think that we still have three interest rate cuts potentially coming this year from the Federal Reserve, and that will help the rate you qualify for on if you apply for a mortgage. And so if you're in a position where you can time your home purchase a little bit, you don't have to buy right now, then watch what happens more broadly with interest rates because that can help you.

Second would be negotiate agent commissions. This was not really in play until very recently with this settlement with the REALTORS Association. There was long time been a kind of de facto 6% commission, but now all of that is negotiable. So go into your home purchase ready to negotiate what your agent's going to get paid.

And then the third thing is not a quick fix, but work to improve your credit score. Make on time bill payments, pay off debt as much as you can, and that will improve your credit score, which will, in turn, get you a better rate on a mortgage.

BRAD SMITH: Molly, thanks so much Molly Moorhead, Yahoo Finance's own--