As was featured in an article last month, Realtor.com released its 2024 Housing Market Forecast and Predictions report recently with a headline of: “Housing Affordability Finally Begins to Turnaround.”
The synopsis of the data as it relates to that headline is contained below:
Home prices grew at a double-digit annual clip for the better part of two years spanning the second half of 2020 through 2022, a notable burst following a growing streak that spanned back to 2012.
As mortgage rates climbed, home price growth flatlined, actually declining on an annual basis in early 2023 before an early-year dip in mortgage rates spurred enough buyer demand to reignite competition for still-limited inventory. Home prices began to climb again, and while they did not reach a new monthly peak, on average for the year we expect that the 2023 median home price will slightly exceed the 2022 annual median.
Nevertheless, even during the brief period when prices eased, using a mortgage to buy a home remained expensive.
Since May 2022, purchasing the typical for-sale home listing at the prevailing rate for a 30-year fixed-rate mortgage with a 20 percent down payment meant forking over a quarter or more of the typical household paycheck. In fact, in October 2023, it required 39 percent of the typical household income and the share is expected to average 36.7 percent for the full calendar year in 2023. The figure has typically ranged around 21 percent, so it is well above historical average.
We expect that the return to pricing in line with financing costs will begin this year, and home prices, mortgage rates, and income growth will each contribute to the improvement.
Home prices are expected to ease slightly, dropping less than 2 percent for the year on average. Combined with lower mortgage rates and income growth this will improve the home purchase mortgage payment share relative to median income to an average 34.9 percent in 2024, with the share slipping under 30 percent by the end of the year.
To read more of Realtor.com’s report, visit realtor.com/research/2024-national-housing-forecast/.
Lauren Bunting is a Broker with Keller Williams Realty of Delmarva in Ocean City, Maryland.
