Housing Affordability Improves for the First Time Since 2020

 Today, we bring you news of a much-anticipated (or at least much-desired) improvement in housing affordability, thanks to two recent Redfin reports.

The first report, dated yesterday (September 24) reveals a 1.4% year-over-year reduction in the household income required to afford a median-priced home—the first annual improvement since June 2020.

Byron Lazine broke down the news in today’s Hot Sheet, tying in consumer sentiment on the U.S. economy.

The second report, published a day later (i.e., today) shows half of all homes listed have gone stale, still unsold after 60 days on the market. That’s good news for buyers, especially those keen to take advantage of today’s lower mortgage rates.

Read on for the highlights.

The Income Needed to Afford a Median-Priced Home Dropped 1.4% YOY

As of Redfin’s data for August 2024, American homebuyers need an annual income of $115,454 to afford (not just buy) a median-priced U.S. home. That’s 1.4% less than they needed one year ago—and the first annual drop since June 2020.

A key factor in that annual decline is the drop in mortgage rates to 6.5% in August (since then dropping to 6.09%), compared to 7.07% in August 2023.

Meanwhile, the typical household income of $83,853 is still 27.4% less than what buyers need to afford a median-priced U.S. home. And fewer than one-third of all home listings in August were affordable to the typical U.S. household—a steep decline from pre-pandemic levels.

That said, the drop in mortgage rates, combined with the recent Fed rate cut, has given a boost to consumer sentiment on the overall economy:

The 11% increase [in mortgage applications] from the previous week isn’t just the fact that we’re at the lowest level of 30-year fixed since February 2023; we’ve been able to say that now for more than two weeks. It’s also just a consumer consensus around how they feel about the economy. If you ask an everyday consumer today, who has some basic knowledge of the fight against inflation and what Jerome Powell’s decision was last week, more of them than not are going to say they feel better right now overall than they did two weeks ago. - Byron Lazine

Regional differences in income needed and median sale prices

Metros in Texas had the largest annual declines in the income needed to afford a home, primarily because Texas leads the nation in new home construction.

Metros with the biggest annual declines in the income needed to buy a home:

1. Austin, TX: Income needed fell 7.9% year over year, largely due to unsustainable home price growth caused by an influx of out-of-state buyers
2. San Antonio, TX (-7.1%)
3. San Francisco, CA (-6.2%)
4. Oakland, CA (-5.5%)
5. Fort Worth, TX (-5.2%)

Those five metros saw the biggest annual drops in median sale prices in August:

1. San Antonio, TX: Median sale price declined year over year by 4.4%
2. Austin, TX (-4.3%)
3. San Francisco, CA (-2.2%)
4. Fort Worth, TX (-1.9%)
5. Oakland, CA (-1.7%)

Only three other major U.S. metros reported declines in median sale prices: Jacksonville, FL, Nashville and Kansas City, MO.

East Coast markets are more likely to see an increase in the income needed to afford a median-priced home, mainly due to low inventory. Homebuyers in Philadelphia need to earn $82,447 a year—5.8% more than a year ago, marking the largest annual increase in the income needed to afford a home.

U.S. metros with the biggest increases in the income needed to buy a home:

1. Philadelphia, PA: Buyers need to earn $82,447 a year—5.8% more than a year ago
2. Chicago, IL (+5.4%)
3. Nassau County, NY (+4.6%)
4. Providence, RI (2.6%)
5. New Brunswick, NJ (2.5%)

All five of the above metros also saw some of the biggest year-over-year growth in median sale prices.

Metros with the biggest annual increases:

1. Nassau County, NY: Up 10% year over year in August 2024
2. Philadelphia, PA (+9.1%)
3. Providence, RI (+7.8%)
4. New Brunswick, NJ (+7.7%)

Housing affordability is improving for the first time in four years, so if you want to buy a home and can afford to, now could be a good time because it’s unlikely to become markedly cheaper in the near future. Many house hunters are waiting to see if mortgage rates fall a lot further, but that probably won’t happen anytime soon. That’s because the Fed’s latest interest rate cut and its plans for future cuts were highly anticipated, meaning they’re already mostly priced into mortgage rates. When the Fed cuts short-term interest rates, long-term rates like mortgage rates don’t always move down nearly as much. - Elijah de la Campa - Redfin Senior Economist

Nearly Half of U.S. Home Listings in August Were “Extra Stale”

Redfin data shows longer listing times for 48% of all listings in August. That 48% is up from 43.2% one year ago—and the highest share for any August since 2019.

Nearly seven in 10 homes (68.5%) had been on the market for at least 30 days in August, up from 63.9% in August 2023, marking the sixth consecutive month of increases in month-old listings. The typical U.S. home spent 37 days on the market before going under contract in August—up six days from a year ago.

This August marks the fifth consecutive month posting a year-over-year increase in the share of homes sitting on the market for at least 60 days (without going under contract). Those numbers go hand in hand with the data on home sales, which hit their lowest level since the start of the pandemic, despite the Fed’s recent cut to the federal funds rate.

 Regional Variations in Market Speed

The typical Seattle home sold in 12 days—the fastest rate among the 50 largest U.S. metros, but still four days slower compared to a year ago.

Metros with the fastest sale times in August 2024:

1. Seattle, WA (12 days)
2. Indianapolis (16 days)
3. Warren, MI (17 days)
4. San Jose, CA (18 days)
5. Oakland, CA (20 days)
6. Detroit, MI (20 days)
7. Boston, MA (20 days)
8. St. Louis, MO (21 days)
9. Cleveland, OH (21 days)
10. Newark, NJ (21 days)

On the flipside, several Florida metros saw homes sitting on the market for more than nine weeks.

Metros with the slowest sale times:

1. West Palm Beach, FL (79 days)
2. Fort Lauderdale, FL (75 days)
3. Jacksonville, FL (65 days)
4. Austin, TX (65 days)
5. Miami, FL (65 days)
6. San Antonio, TX (57 days)
7. Phoenix, AZ (55 days)
8. Nashville, TN (53 days)
9. Pittsburgh, PA (50 days)
10. Chicago, IL (49 days)

Anyone who has been paying attention to the housing market over the past few years knows that desirable homes sell right away. That’s been true ever since the overall market slowed down after mortgage rates shot up a couple years ago. Now if a home is still on the market after a few weeks, buyers assume there’s something wrong with it. That’s why it’s so important to price your home to move quickly. Buyers see the days on market and when it starts to tick up, it’s like a scarlet letter. - Daryl Fairweather - Redfin Chief Economist

Posted by Sarah Lentz | Sep 25, 2024 | Housing Market

https://nowbam.com/housing-affordability-improves-for-the-first-time-since-2020/

@ChuckBarberini - #ChuckBarberiniRealEstate - @ChuckBarberiniRealEstate

@Golden_State_Guide_Service - @Citizen.Number.One