What the fall housing market looks like for buyers

While housing affordability remains a challenge for many buyers in the U.S., conditions are somewhat improving due to lower mortgage rates.

Buyers need to earn $115,000 to afford the typical home in the U.S., according to a new report by Redfin, an online real estate brokerage firm. That’s down 1% from a year ago, and represents the first decline since 2020.

Housing payments posted the biggest decline in four years, Redfin also found. The median mortgage payment was $2,534 during the four weeks ending Sept. 15, down 2.7% from a year ago.

Both declines stem from lower mortgage rates, said Daryl Fairweather, chief economist at Redfin.

As of Sept. 19, the average 30-year fixed rate mortgage is 6.09%, down from 6.20% a week prior, according to Freddie Mac data via the Fed. Rates peaked this year at 7.22% on May 2.

“The only reason mortgage payments are down is because of the rate effect,” Fairweather said.

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Challenges remain: The typical household earns 27% less than what they need to afford a home, about $84,000 a year, per Redfin data. Home prices are still high, too. The median asking price for newly listed homes for sale is $398,475, up 5.4% from a year ago, Redfin found.

While housing overall continues to be unaffordable for most buyers, “this is as good as it gets,” said Orphe Divounguy, senior economist at Zillow, as the market is generally seeing lower mortgage rates, more inventory and low buyer competition.

Here’s what buyers can expect in the coming months.

Lower home loan rates provide “a great opportunity for buyers who have been waiting,” Divounguy said.

Just because the Federal Reserve cut interest rates, it doesn’t “necessarily guarantee mortgage rates will continue to fall,” he said.

While mortgage rates are partly influenced by the Fed’s policy, they are also tied to Treasury yields and other economic data.

“Mortgage rates will go by the way of the economy,” said Melissa Cohn, regional vice president of William Raveis Mortgage in New York.

“If the economy shows signs of weakening … rates will come down,” Cohn said. “If we see the opposite, and that the economy is chugging along and employment gets stronger, it’s quite possible that rates will go up.”

On top of lower mortgage rates, a higher inventory of homes for sale makes the housing market more favorable for buyers, said Divounguy.

There were 1,350,000 homes for sale by the end of August, up 0.7% from a month prior, according to the National Association of Realtors. That inventory level was up 22.7% compared with August 2023.

Meanwhile, homebuilder confidence in the market for newly built single family homes improved in September, according to the…