Rosalind Evans
According to a recent report, this summer has brought a slight improvement in home affordability for buyers. The median new mortgage payment decreased to $2,167 in June, a 2.4% decline from $2,219 in May, as the Mortgage Bankers Association (MBA) reported. While the landscape remains challenging, these small positive shifts are worth noting.
Improved Affordability: A Positive Shift
Edward Seiler, MBA’s associate vice president of housing economics, said, “Homebuyer affordability conditions improved for the second straight month as declining mortgage rates continue to increase purchasing power and entice some borrowers back into the housing market.” This improvement results from decreasing mortgage rates and a moderation in home-price growth.
Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors, added, “Housing affordability is improving ever so modestly, but it is moving in the right direction.” Although the progress is incremental, it’s a step forward for prospective homebuyers.
The Bigger Picture: High Payments Persist
Despite these positive changes, the broader context shows that housing payments are still significantly high. The median loan amount on new applications fell slightly to $320,512 in June from $325,000 in May, signaling a moderation in home-price growth. Yun highlighted that “the typical monthly mortgage payment has doubled from pre-Covid years.” While mortgage rates have decreased to 6.78% as of July 25, the overall cost remains substantially higher than before the pandemic.
More Sellers, Less Competition
The market dynamics are shifting, with more sellers entering the market and less competition for buyers. Yun mentioned that “investors think the Federal Reserve could cut interest rates about three times in the latter half of the year, which would further improve housing affordability.” This potential reduction in interest rates could create even more favorable conditions for buyers.
Chen Zhao, the economic research lead at Redfin, observed, “The market is certainly tilting more towards buyers.” The increase in housing inventory, up 3.1% from May and 23.4% from a year ago, gives buyers more options and reduces the likelihood of bidding wars. Chief CoreLogic economist Selma Hepp noted, “With more inventory, that does certainly mean that buyers have more options.”
Sellers Adjusting Strategies
In response to these changes, sellers adjust their strategies to attract buyers. Orphe Divounguy, a senior economist at Zillow, mentioned that “some sellers are cutting prices to attract buyers.” About 19.8% of homes for sale in June had a price cut, the highest level for any June on record. Additionally, 31% of home builders cut prices in July to increase sales, up from previous months.
While the housing market still presents challenges, recent improvements in affordability and increased inventory provide some hope for buyers. However, as Lawrence Yun advises, buyers must stay within their budgets despite these positive changes. As the market evolves, staying informed and prepared will be key to making sound financial decisions.
