NAR reports slower price growth and lower mortgage payments for buyers
Housing affordability improved modestly in the third quarter, as mortgage rates trended downward and wage growth began to outpace home price increases, according to the National Association of Realtors (NAR).
Though home prices continued to rise in many metro areas, NAR chief economist Lawrence Yun suggested that the worst of the affordability crisis may be over.
“Housing affordability has been a challenge, but the worst appears to be over,” Yun said. “Rising wages are outpacing home price increases. Despite some short-term swings, mortgage rates are set to stabilize below last year’s levels. More inventory is reaching the market and providing additional options for consumers.”
As mortgage rates slightly declined in the third quarter, monthly mortgage payments on a typical single-family home became a bit more affordable. For a home with a 20% down payment, the average monthly mortgage payment dropped 5.5% from the previous quarter, down to $2,137. This represents a 2.4% year-over-year decrease, saving the average homeowner $52 per month.
Affordability metrics show that homeowners are now spending 25.2% of their income on mortgage payments, compared to 26.9% in the previous quarter and 27.1% a year ago. First-time buyers also saw some relief. For a starter home valued at $355,900 with a 10% down payment, the monthly mortgage payment fell to $2,097, down from $2,218 in the prior quarter.
A family needed an income of at least $100,000 to qualify for a 10% down payment mortgage in 42.5% of markets, a slight improvement from 48% in the previous quarter. However, only 2.2% of markets required less than $50,000 in qualifying income, down from 2.7% previously.
NAR’s quarterly report showed that 87% of the metro markets it tracks (196 out of 226) recorded home price gains in the third quarter. The national median price for a single-family existing home rose by 3.1% year-over-year, reaching $418,700. However, only 7% of these markets saw double-digit price increases, down from 13% in the previous quarter, signaling a shift toward more moderate growth.
“Home prices remain on solid ground as reflected by the vast number of markets experiencing gains,” said Yun. “A typical homeowner accumulated $147,000 in housing wealth in the last five years. Even with the rapid price appreciation over the last few years, the likelihood of a market crash is minimal. Distressed property sales and the number of people defaulting on mortgage payments are both at historic lows.”
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While prices climbed in most metro areas, 13% of markets (29 out of 226) experienced home price declines, a slight increase from the nearly 10% that saw declines in the second quarter. The most expensive US markets remained concentrated in California, with San Jose-Sunnyvale-Santa Clara leading at a median price of $1.9 million, followed by Anaheim and San Francisco. Other high-cost markets included Honolulu, Hawaii, and Boulder, Colorado.
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