3 Reasons Affordability Is Showing Signs of Improvement This Fall

For the past couple of years, its been tough for a lot of homebuyers to make the numbers work. Home prices shot up. Mortgage rates too. And a number of people hit pause because it just didnt feel possible. Maybe you were one of them.

But theres some encouraging news. If youve been waiting for a better time to jump back in, affordability may finally be showing signs of improvement this fall.

The latest data from Redfin shows the typical monthly mortgage payment has been coming down, and is now about $290 lower than it was just a few months ago (see graph below):

And heres why this is happening. The cost of buying a home really comes down to three things:

• Mortgage rates
• Home prices
• Your wages

Right now, all three are finally moving in a better direction for you. While that doesnt mean its suddenly easy to buy at todays rates and prices, it does mean its not as challenging.

1. Mortgage Rates

Mortgage rates have come down compared to earlier this year. In May, they were roughly 7%. And now, theyre closer to 6.3% (see graph below):

That may not sound like a big deal, but it does matter. Even small changes in rates can make a difference in your future monthly payment. Compared to when rates were 7%, if you take out an average $400K mortgage now at 6.3%, itll cost about $190 less a month based on just rates alone.

And for some people, thats been enough to make buying a home possible again. As Joel Kan, VP and Deputy Chief Economist at the Mortgage Bankers Association (MBA), explained on September 10^th:

The downward rate movement spurred the strongest week of borrower demand since 2022 . . . Purchase applications increased to the highest level since July and continued to run more than 20 percent ahead of last years pace.

2. Home Prices

After several years of prices rising very rapidly, price growth has finally slowed. As Odeta Kushi, Deputy Chief Economist at First American, puts it:

National home price growth remains positive, but muted low single digits and we expect this trend to continue in the second half of the year.

For buyers, thats actually a big relief. That moderation makes it easier to plan your budget. And in some markets, prices have even dipped slightly. If you're in one of the markets, you may be able to find something thats more affordable than you'd expect.

3. Wages

According to the Bureau of Labor Statistics (BLS), wages are up near 4% annually. Lawrence Yun, Chief Economist at NAR, explains why that number is so important right now:

Wage growth is now comfortably outpacing home price growth, and buyers have more choices.

In other words, the typical paycheck is rising faster than home prices right now, which helps make buying a little more affordable. Now, its not a big difference, but in a market like this, every bit counts.

What This Means for You

Lower rates, slower price growth, and stronger wages might be enough to make the numbers finally work for you this fall.

While affordability is still tight, its a little easier on your wallet to buy now than it was just few months ago. Remember, data from Redfin shows the typical monthly mortgage payment is already around $290 lower than it was earlier this year.

Bottom Line

Have you been wondering if its worth taking another look at buying?

Work with a professional to re-run the numbers. Together you can go over your budget, see whats changed, and figure out if this fall is the time to turn window-shopping into key-turning.