Making the numbers work has been difficult for many homebuyers over the last few years. Prices for homes skyrocketed. rates for mortgages as well. And because it didn’t seem possible, many people hit pause. Perhaps you were among them.
However, there is some good news. This fall, affordability might finally be improving if you’ve been waiting for a better moment to get back in.
According to Redfin’s most recent data, the average monthly mortgage payment has been declining and is currently around $290 less than it was a few months ago (see graph below):
Here’s why this is taking place. Three factors ultimately determine the cost of purchasing a home:
- Mortgage rates
- Home prices
- Your wages
For you, all three are now at last heading in the right direction. That does not imply that purchasing at the current rates and prices is suddenly simple, but it does imply that it is less difficult.
1. Mortgage Rates
Compared to earlier this year, mortgage rates have decreased. They were about 7% in May. They are now nearer 6.3% (see graph below):
Even though it might not seem like much, it does matter. Your future monthly payment may change as a result of even minor rate changes. If you take out an average $400K mortgage now at 6.3%, the monthly cost will be about $190 less than it was when rates were 7%.
And for some, that has been sufficient to enable them to purchase a home once more. On September 10th, Joel Kan, the Mortgage Bankers Association’s (MBA) vice president and deputy chief economist, clarified:
The week of borrower demand was the strongest since 2022 due to the downward rate movement. Purchase applications continued to run more than 20 percent faster than they did the previous year, reaching their highest level since July.
2. Home Prices
The rate of price growth has finally slowed after several years of extremely high price increases. According to First American Deputy Chief Economist Odeta Kushi:
National home price growth remains positive, but muted — low single digits — and we expect this trend to continue in the second half of the year.
In fact, that is a huge relief for purchasers. Budgeting is made simpler by that moderation. Additionally, prices have somewhat decreased in some markets. You might be able to find something that is less expensive than you would anticipate if you’re in one of the markets.
3. Wages
The Bureau of Labor Statistics (BLS) reports that wages are increasing by almost 4% per year. NAR Chief Economist Lawrence Yun explains why that figure is so significant at the moment:
Buyers now have more options, and wage growth is comfortably outpacing the growth of home prices.
To put it another way, the average salary is currently increasing more quickly than the cost of homes, which makes purchasing somewhat more feasible. Even though there isn’t much of a difference, every little bit matters in a market like this.
What This Means for You
You may be able to finally make the numbers work for you this fall with lower rates, slower price growth, and stronger wages.
Even though prices are still high, purchasing now is a little less expensive than it was a few months ago. Recall that the average monthly mortgage payment is already about $290 less than it was at the beginning of the year, according to Redfin data.
Conclusion
Rerun the numbers with the help of a professional. Together, you can review your budget, assess any changes, and determine whether this fall is the right time to go beyond window shopping and start turning heads.
FAQs (Frequently asked Questions)
- What are the main reasons housing affordability is improving this fall?
- How much have typical monthly mortgage payments decreased recently?
- Are mortgage rates still high, and how have they changed?
- Have home prices started to decrease?
- Is wage growth helping with affordability?
- Yes, in many markets, wages are currently rising more quickly than home prices, which is reducing housing costs and giving buyers more options this fall.