High mortgage rates and home prices sidelined homebuyers for years, especially in the aftermath of the pandemic housing market that saw sub-3% mortgage rates and more affordable home prices. But ever since then, mortgage rates spiked, peaking at 8% in late 2023.
While a glance at most other home-price indexes would show a stark increase in home prices, First American’s actually shows national housing affordability rose 3.1% year-over-year in June, marking the fifth consecutive month with an annual gain.
There are some promising signs housing affordability is improving: mortgage rates are slightly declining, home-price growth is slowing, and household incomes are somewhat increasing, according to First American. That’s led housing affordability to the best point it’s been since September 2024, First American’s analysis shows.
Home prices either declined or grew less than 1% annually in more than half of major U.S. metros, and income outpaced home-price appreciation in about 70% of markets, according to First American. Austin, Texas, saw the sharpest decline at 13% from its June 2022 peak and San Francisco at 10% down from its April 2022 peak.
“While sellers may feel the pinch of waning pricing power, slower price growth—paired with rising incomes—is finally giving buyers a much-needed edge,” Fleming wrote.
Still, housing affordability, as measured by RHPI, remains more than 70% higher (worse) than the pre-pandemic five-year average.
“America’s homeowner population is no longer growing because rising home prices, high mortgage rates and economic uncertainty have made it increasingly difficult to own a home,” wrote Chen Zhao, Redfin’s head of economics research. “People are also getting married and starting families later, which means they’re buying homes later—another factor that may be at play.”
“While this process will take time, likely years, the balance of power is no longer as one-sided as it was during the pandemic frenzy,” Fleming wrote.
