Recent reports indicate a slight improvement in home affordability for buyers this summer. According to data from the Mortgage Bankers Association, the median new mortgage payment dropped to $2,167 in June, showing a 2.4% decline from the previous month. This improvement is attributed to declining mortgage rates, which have increased the purchasing power of homebuyers and enticed some borrowers back into the housing market.
Lawrence Yun, Chief Economist and Senior Vice President of research at the National Association of Realtors, sees promising indicators for homebuyers. He notes that while housing affordability is only improving modestly, it is moving in the right direction. The median loan amount on new applications has also decreased, indicating that home-price growth is moderating.
Although the housing market is not yet a buyer’s market, experts believe that there are favorable conditions for buyers due to increasing supply and declining rates. Chen Zhao, the economic research lead at Redfin, states that the market is balancing itself, tilting more towards buyers. Orphe Divounguy, a senior economist at Zillow, adds that while there is still an affordability challenge, conditions are moving towards a more neutral market.
One of the key factors contributing to the shift in market conditions is the increase in housing inventory. Total housing inventory at the end of June registered at 1.32 million units, indicating a 3.1% increase from May and a 23.4% increase from a year ago. This rise in inventory has led to a 4.1-month supply of unsold inventory, providing buyers with more options and reducing the likelihood of bidding wars.
The increase in housing inventory has also had an impact on sellers, who are now facing more competition in the market. In response, some sellers are cutting prices to attract buyers. According to Redfin, about one in five homes for sale in June had a price cut, the highest level on record for the month of June. Additionally, home builders are also cutting prices to increase home sales, indicating a shift in market dynamics.
Despite the improving conditions for buyers, Lawrence Yun emphasizes the importance of staying within budget. With more options available and sellers willing to negotiate, buyers have the opportunity to make informed decisions. While it may be tempting to overspend, Yun advises buyers to be mindful of their budget and make choices that align with their financial goals.
The state of home affordability for buyers in summer 2024 shows promising signs of improvement. With declining mortgage rates, increasing housing inventory, and competitive pricing from sellers and builders, buyers are in a favorable position in the market. However, it is essential for buyers to exercise caution and stay within budget to make sound investment decisions in the current real estate landscape.
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