SEATTLE, WA – A recent analysis from Zillow reveals that housing affordability hit a 19-month high in September, thanks to a temporary drop in mortgage rates. This shift expanded the pool of homes middle-income households could afford, providing some hope for prospective buyers after months of challenging affordability. However, rising mortgage rates in the weeks following have added new pressure on the market.
Mortgage Rate Impact on Affordability
According to the report, mortgage rates fell to an average of 6.18% in September, the lowest level in two years. This allowed middle-income households to comfortably afford 27.7% of homes listed for sale, compared to just 22.7% in May when mortgage rates averaged 7.06%. The jump marked the largest share of affordable homes since February 2023.
Orphe Divounguy, a senior economist at Zillow Home Loans, emphasized the significant influence of mortgage rate fluctuations on buyer affordability. “Affordability remains the top challenge for first-time home buyers especially, and buying power can change quickly with the unpredictable nature of mortgage rates,” he said.
But affordability gains proved short-lived. By mid-November, mortgage rates had climbed back to nearly 7%, highlighting the volatility in the market. Despite the recent increases, rates remain below 2022 levels, with a larger percentage of homes remaining affordable in all 50 of the country’s largest metro areas compared to the prior year.
Regional Trends
Some areas of the U.S. have fared better than others in terms of affordability. Metro areas like Pittsburgh (72.1%), St. Louis (64.2%), Buffalo (63.7%), and Detroit (61.5%) led the nation in September, with more than half of their listings affordable to middle-income households.
Cities in the Sun Belt also saw encouraging gains. Austin experienced the largest year-over-year improvement, with a 13.2 percentage-point increase in affordable listings. Other notable performers included Raleigh (+12.4), San Antonio (+12.2), and Phoenix (+12.1).
On the other hand, affordability in California and parts of the Northeast remains tough. Less than 15% of listings in metro areas like Los Angeles (1.6%), San Diego (4.2%), New York City (11.4%), and Boston (11.6%) were deemed affordable to middle-income households in October.
Tools to Navigate Volatile Rates
Given the unpredictable nature of mortgage rates, Zillow is offering tools like the “BuyAbility” feature through Zillow Home Loans. This tool integrates live mortgage rate data to provide buyers with personalized home price estimates and monthly payments within their budget. Adjustments to mortgage rates or credit scores are automatically reflected, giving shoppers a dynamic view of homes within their affordability range.
Divounguy advised buyers to stay ready for opportunities. “While there’s no guarantee, signs point to rates moving a bit lower into next year. However, the path will be bumpy, and buyers should stay ready to move forward when the time is right for them.”
A Complex Path Forward
Despite a temporary boost in September, housing affordability remains one of the biggest challenges for home buyers across the U.S. With rates continuing to fluctuate, prospective buyers will need to remain vigilant and adaptable as they navigate an unpredictable market. For now, affordability gains in certain regions and tools like those from Zillow offer glimpses of hope in an otherwise complex housing landscape.
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