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Home buying has improved slightly for buyers this summer, according to a recent report.
The average new mortgage payment was $2,167 in June, down 2.4% from $2,219 in May, according to new data from the Mortgage Bankers Association. The index measures how much new monthly mortgage payments change over time, relative to income.
A decline in the index indicates an improvement in a borrower's affordability, which can happen when loan application amounts and mortgage rates fall, or when homebuyers' earnings grow.
“Homebuyers’ affordability conditions improved for the second straight month as lower mortgage rates continued to increase purchasing power and lure some borrowers back into the housing market,” Edward Sellers, assistant vice president for housing economics at the Home Buyers Association, wrote in the statement.
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Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors, also sees promising signs for homebuyers.
“Housing affordability is improving very modestly, but it is moving in the right direction,” he said.
The “bigger picture” shows that payments remain high.
The average loan amount on new applications fell to $320,512 in June, from $325,000 in May, a sign that home price growth is also slowing, according to MBA data provided to CNBC.
The slight drop in mortgage rates in June certainly helped buyers, Yun added.
The 30-year fixed mortgage rate fell to 6.78% on July 25, compared with 7.22% on May 2, according to Freddie Mac data via the Federal Reserve.
But that’s “a very slight improvement” in context, he said — typical monthly mortgage payments have essentially doubled from pre-Covid years. Pre-Covid, a $1,000 mortgage payment was the norm; today it’s over $2,000, he said.
“In the bigger picture, it’s a significant increase compared to pre-Covid conditions, but on a month-on-month basis, it’s a slight improvement,” Yun said.
More sellers, less competition for buyers.
Yun added that investors believe the Federal Reserve may cut interest rates about three times in the second half of the year, which would “further improve housing affordability.”
Although the housing market is not yet a buyer's market, increased supply and lower prices are already creating favorable conditions for buyers, according to experts.
Housing affordability is improving modestly, but moving in the right direction.
Lawrence Yun
Chief Economist and Senior Vice President of Research, National Association of Realtors
“The market is definitely moving more towards buyers,” said Chen Zhao, head of economic research at online real estate brokerage Redfin, noting that the market is balancing itself.
While the affordability challenge remains broadly present, conditions are “moving toward a more neutral market,” according to Orve DeFungi, chief economist at Zillow.
In some areas, buyers are becoming more selective as more listings come online. Total housing inventory recorded at the end of June was 1.32 million units, up 3.1% from May and 23.4% from a year ago, according to the National Association of Realtors. Unsold inventory stands at 4.1 months, up from 3.7 months in May and 3.1 months a year ago.
“It's very good news for the buyer,” Yun said, as he is unlikely to get involved in a bidding war.
Competition is fading faster in the South, where all major Southern markets except Dallas and Raleigh are either neutral or buyer-friendly, according to Zillow's June 2024 housing market report.
“With inventory building up, it certainly means that buyers have more options,” said Selma Heap, chief economist at CoreLogic. “But it’s very regional. And those with the biggest inventory builds are struggling with other issues,” such as higher insurance costs.
Some sellers are lowering prices to attract buyers, Devonji said.
“Sellers need to do more to attract buyers,” he said. “We’re seeing one in four sellers lowering their prices — the most in any June in the past six years — in an attempt to sway buyers.”
According to Redfin, about one in five homes, or 19.8%, of homes listed for sale in June saw their price reduced, the highest level for any June on record. That’s up from 14.4% a year ago.
“Sellers are always trying to maximize their prices, but sellers should keep in mind that there is more competition,” Yun added.
Homebuilders are also trying to attract buyers: About 31% of builders cut prices to boost home sales, up from 29% in June and 25% in May, according to a July 2024 survey by the National Association of Home Builders.
However, Yun said the “most important thing” for buyers is “sticking to a budget. Just because mortgage rates are down doesn’t mean it’s time to stretch your budget.”
