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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:
- 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
- San Antonio, TX (-7.1%)
- San Francisco, CA (-6.2%)
- Oakland, CA (-5.5%)
- Fort Worth, TX (-5.2%)
Those five metros saw the biggest annual drops in median sale prices in August:
- San Antonio, TX: Median sale price declined year over year by 4.4%
- Austin, TX (-4.3%)
- San Francisco, CA (-2.2%)
- Fort Worth, TX (-1.9%)
- Oakland, CA (-1.7%)
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