Home Prices are Getting Slightly More Affordable, but Down Payments are Still Holding Buyers Back

Mortgage rates are lower, home prices are easing and there is more supply on the market for sale. All of that adds up to improved affordability for today’s homebuyers. Saving for a down payment, however, is still the biggest hurdle for first-time buyers. Prices nationally are basically flat compared with where they were a year ago, according to Parcl Labs.
They dipped into negative territory earlier this month and are now just 0.3% higher year over year. The latest S&P Cotality Case-Shiller home price index, which reflects pricing from October, showed large disparities among metropolitan markets, with Chicago, New York and Cleveland having the biggest gains and eight cities in negative territory, including Tampa, Phoenix and Dallas.
“National home prices also continue to lag consumer inflation… roughly 1.8 percentage points higher than the latest housing appreciation… implying a slight decline in inflation-adjusted home values,” explained Nicholas Godec of S&P Dow Jones Indices. Mortgage rates, too, are coming down.
The average on the 30-year fixed mortgage is currently 6.19%, down from well over 7% earlier this year. For a buyer putting down 20% on a $410,000 home, the monthly payment today is about $200 less than a year ago as weaker prices and lower rates change the math for first-time buyers.
The typical homebuyer now needs seven years to save for a down payment, down from 12 years in 2022 but still roughly double pre-pandemic levels. Down payments continue to be the biggest hurdle to homeownership, which fell to 65%, the lowest level since 2019.
An improved supply of homes for sale is adding momentum to the market, with active listings about 12% higher than a year ago, and pending home sales up 3.3% month-over-month and 2.6% year-over-year. “Improving housing affordability… and more inventory choices compared to last year are attracting more buyers to the market,” said Lawrence Yun.

(Source: CNBC)