US Home Affordability Improves For the First Since June 2020, Redfin Says

On Thursday, Redfin reported that US homebuyers need to earn an annual income of $115,454 to afford the median priced home—currently $433,101. That is down 1.4% year-over-year and the first annual decline since June 2020, when mortgage rates set a new record low.

This is based on a Redfin analysis of the estimated median US household income and median monthly housing payments as of August. References to the “median-priced” home refer to the median sale price of homes that were purchased during the month. Redfin considers a home affordable if a buyer taking out a mortgage spends no more than 30% of their income on their monthly housing payment.

The income needed to afford a home fell because mortgage rates posted their first annual decline in three years. The average interest rate on a 30-year mortgage dropped to 6.5% in August from 7.07% a year earlier and has since fallen further, now sitting at 6.09%.

Commenting on the report, Redfin Senior Economist Elijah de la Campa said:

“Housing affordability is improving for the first time in four years, so if you want to buy a home and can afford to, now could be a good time because it’s unlikely to become markedly cheaper in the near future. Many house hunters are waiting to see if mortgage rates fall a lot further, but that probably won’t happen anytime soon. That’s because the Fed’s latest interest rate cut and its plans for future cuts were highly anticipated, meaning they’re already mostly priced into mortgage rates. When the Fed cuts short-term interest rates, long-term rates like mortgage rates don’t always move down nearly as much.”