Fall Housing Market Outlook: What Buyers Can Expect in the Coming Months
As the fall season approaches, economists are predicting a mixed outlook for the housing market in the United States. While housing affordability remains a challenge for many buyers, there are some signs of improvement due to lower mortgage rates. According to a new report by Redfin, buyers need to earn $115,000 to afford the typical home in the U.S. This figure is down 1% from a year ago, marking the first decline since 2020.
Lower mortgage rates have played a significant role in improving housing affordability. The median mortgage payment was $2,534 during the four weeks ending Sept. 15, down 2.7% from a year ago. This decline can be attributed to the decrease in mortgage rates, with the average 30-year fixed rate mortgage standing at 6.09% as of Sept. 19, down from 6.20% the previous week.
Challenges still remain in the housing market, as the typical household earns 27% less than what they need to afford a home. Additionally, home prices continue to rise, with the median asking price for newly listed homes for sale at $398,475, up 5.4% from a year ago. Despite these challenges, economists believe that the current conditions represent the best opportunity for buyers in the near term.
Lower Mortgage Rates and Increased Inventory
One of the key factors driving the improved housing market outlook is the combination of lower mortgage rates and increased inventory. Lower home loan rates present a great opportunity for buyers who have been waiting to enter the market. While the Federal Reserve’s interest rate cuts have influenced mortgage rates, other economic factors such as Treasury yields also play a role in determining rates.
Melissa Cohn, regional vice president of William Raveis Mortgage in New York, highlights that mortgage rates will be influenced by the overall health of the economy. If the economy shows signs of weakening, rates are likely to come down. Conversely, if the economy continues to strengthen, rates could increase.
In addition to lower mortgage rates, there has been an uptick in the inventory of homes for sale. According to the National Association of Realtors, there were 1,350,000 homes for sale by the end of August, up 0.7% from the previous month. This increase in inventory levels signals a more favorable market for buyers, as they have more options to choose from.
Builders are also showing confidence in the market for newly built single-family homes, with the National Association of Home Builders reporting an improvement in builder confidence in September. The share of builders cutting prices has decreased, indicating an increase in foot traffic and potential competition in the market.
Price Growth and Future Expectations
Price growth in the housing market will depend on the level of existing home inventory. Robert Dietz, chief economist at NAHB, explains that as existing home inventory rises, there may be downward pressure on prices. This is due to the “lock-in effect,” where homeowners with record-low mortgage rates may be hesitant to sell and finance a new home at a higher rate.
Looking ahead, economists believe that the housing market is not expected to worsen significantly over the next 12 months. Daryl Fairweather, chief economist at Redfin, suggests that house hunters who have been unable to find a home may have a better chance next year when more listings become available. However, this increase in inventory may also lead to higher competition among buyers.
Fairweather cautions that buyers may be trading one difficulty for another if they wait for more inventory to become available. While lower mortgage rates could lead to a growth in the number of homes for sale, high borrowing costs may still deter some homeowners from entering the market.
Overall, the fall housing market outlook presents a mixed picture for buyers. While there are some positive indicators such as lower mortgage rates and increased inventory, challenges such as high home prices and income disparities still persist. Buyers will need to carefully weigh their options and consider the current market conditions before making any decisions.