As mortgage interest rates begin to trend down, housing affordability is improving. According to financial services company Intercontinental Exchange's (ICE) September 2024 Mortgage Monitor Report, mortgage interest rate declines in August 2024 improved home affordability to its best level in six months. Three major U.S. markets—Birmingham, Ala., Des Moines, Iowa, and McAllen, Texas—have returned to their long-term affordability averages, with several other cities nearing this benchmark as well. However, in over half of the major U.S. housing markets, homebuyers still need at least 10% more than the local median income to afford an average priced home, and some California markets are even seeing a 20% higher payment-to-income ratio than usual.
Despite these regional trends, Andy Walden, ICE vice president of research and analysis, says this spike in affordability is positive news for the broader housing market.
“Recent easing in mortgage rates brought some much-sought relief to prospective homebuyers,” said Walden. “Along with a general cooling in home price growth, rates falling below 6.5% made August the most affordable month for housing since February. When it comes to affordability, as always, context is important: it still takes 10 percentage points more of the median income to buy the average house than it has on average over the last 30 years. Our own ICE Market Trends data shows that prospective homebuyers are also facing record high down payments and credit scores among recent purchase mortgages. Affordability is still very much a challenge and that is likely to continue for the foreseeable future, but August’s improvement is certainly welcome progress.”