NAR: Home Affordability Improved Slightly in Q4 Due to Lower Mortgage Rates


Housing affordability marginally improved in the fourth quarter on the back of declining mortgage rates, according to the National Association of Realtors (NAR).

However, lack of inventory and rising home prices offset the affordability gains from lower rates, resulting in only a slight improvement.

As of the end of the quarter, the monthly mortgage payment on a typical existing single-family home with a 20% down payment was $2,163, down 1.2% from the third quarter but up 10% from one year ago.

Families typically spent 26.1% of their income on mortgage payments, down from 26.7% in the previous quarter but up from 24.2% one year ago, according to the association’s data.

For a typical starter home valued at $332,900 with a 10% down payment loan, the monthly mortgage payment fell slightly to $2,120, down 1.2% from the prior quarter.

However, that was an increase of $190, or 9.8%, from one year ago.

First-time buyers typically spent 39.4% of their family income on mortgage payments, down from 40.3% in the prior quarter.

A family needed a qualifying income of at least $100,000 to afford a 10% down payment mortgage in 47.1% of markets, up from 45.7% in the previous quarter.

Yet, a family needed a qualifying income of less than $50,000 to afford a home in 2.3% of markets, down from 2.7% in the prior quarter. 

More than 85% of metro areas posted home price gains in the fourth quarter, according to NAR.

The national median single-family existing-home price increased 3.5% compared with the fourth quarter of 2022 to reach $391,700.

The average rate for a 30-year fixed-rate mortgage was 6.61%, as of the end of the quarter, down from 7.79% in the third quarter.

“Homeowners have benefited from housing wealth accumulation,” says Lawrence Yun, chief economist for NAR, in a statement. “However, many homebuyers have been shocked at high housing costs, with a typical monthly mortgage payment rising from $1,000 three years ago to more than $2,000 last year.”

This doubling in housing costs for recent home buyers is not included in the official consumer price index inflation calculations and contributes to the sense of dissatisfaction about the economy,” Yun says.

“Sales were restrained due to limited inventory,” Yun adds. “But increased homebuilding, along with lower mortgage rates, will not only improve housing affordability but also help bring more homes onto the market in 2024.”

The top 10 metro areas with the largest year-over-year median price increases, which can be influenced by the types of homes sold during the quarter, included Dayton, Ohio (19.9%); Kingsport-Bristol-Bristol, Tenn.-Va. (19.2%); Fond du Lac, Wis. (18.6%); Trenton, N.J. (17.3%); Salinas, Calif. (17.1%); Newark, N.J.-Pa. (16.7%); Anniston-Oxford, Ala. (15.7%); Bloomington, Ill. (15.4%); Johnson City, Tenn. (15.2%); and Anaheim-Santa Ana-Irvine, Calif. (14.8%).

Photo: Breno Assis

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