W
hile housing affordability remains a challenge in the US, conditions are slowly improving due to lower mortgage rates. According to Redfin, buyers need to earn $115,000 to afford the typical home, down 1% from last year and marking the first decline since 2020. Housing payments have also decreased, with the median mortgage payment dropping 2.7% to $2,534 over the past four weeks.

    Lower mortgage rates are driving these improvements, said Daryl Fairweather, chief economist at Redfin. As of September 19, the average 30-year fixed rate mortgage is 6.09%, down from 6.20% a week prior. However, challenges persist: the typical household earns 27% less than what they need to afford a home, and home prices remain high.

    Despite these hurdles, economists say this is as good as it gets for buyers. "This is a great opportunity for buyers who have been waiting," said Orphe Divounguy, senior economist at Zillow. However, mortgage rates are influenced by the economy and may not continue to fall. If the economy weakens, rates could drop further, but if it strengthens, they may rise.

    A higher inventory of homes for sale is also making the market more favorable for buyers. There were 1,350,000 homes for sale at the end of August, up 0.7% from a month prior and 22.7% compared to last year. Homebuilder confidence has improved, and some builders are starting to cut prices.

    While price growth will depend on existing home inventory, economists say the housing market is unlikely to get worse over the next 12 months. However, buyers who wait may face higher competition when more listings become available.