As mortgage rates decline and wages rise, new data suggests that homeownership is becoming slightly more affordable. But are these changes enough to relieve the pressure on homebuyers? Let’s take a closer look at the latest reports from Attom and the Mortgage Bankers Association (MBA).
Mortgage Payments Are Shrinking
For the past two years, high mortgage rates have pushed housing affordability out of reach for many. But with recent interest rate cuts from the Federal Reserve, relief may be in sight. According to Attom's third-quarter 2024 housing affordability report, lower mortgage rates, increased wages, and slower home-price growth are making it easier for Americans to own homes.
In fact, homeownership expenses now consume 33.5% of a typical household's budget, slightly better than in the second quarter of 2024. Similarly, the MBA's Purchase Application Payment Index shows a 5.2% drop in the median mortgage payment between July and August, offering more breathing room for buyers.
Home Prices Still Rising
While declining mortgage rates are a step in the right direction, home prices continue to rise. Attom’s report highlights that 63% of counties analyzed experienced a jump in median home prices from the second to the third quarter, and 85% saw higher prices compared to a year ago.
This ongoing rise means that, despite some affordability improvements, the cost of homeownership remains out of reach for many. Attom’s data shows that in 99% of the counties analyzed, single-family homes and condos are still less affordable than historical averages.
Which Areas Are Improving?
Some regions, particularly in California and Texas, are seeing signs of improvement. Counties like Orange, Alameda, and Santa Clara in California, along with Travis County in Texas, saw the largest drops in the percentage of wages taken up by homeownership costs.
However, other areas continue to struggle. Santa Cruz County, California, tops the list, where owning a home eats up 108.5% of the average local wage. Other high-cost areas include Brooklyn, New York, and Maui County, Hawaii.
Looking Ahead: What’s Next for Homebuyers?
Both Attom and MBA suggest that home affordability is on a gradual path to recovery. According to Edward Seiler, associate vice president at MBA, “Homebuyer affordability conditions improved for the fourth consecutive month, with lower mortgage rates, rising incomes, and slower home-price growth giving prospective buyers’ budgets a much-needed boost.”