The average homebuyer in the United States has gained at least $40,000 in spending power as mortgage rates cooled after soaring past 8% in October 2023, according to a report.
Homebuyers with a $3,000 budget for their monthly mortgage payments can now afford a $473,000 home with a 6.7% mortgage rate. In comparison, the average household on the same budget could have only bought a $416,000 home with an average rate of 7.8% in October last year, per a new analysis from residential real estate brokerage Redfin.
The median home price in the country is $363,000, according to the firm's data. That means homebuyers with a rate of 6.7% will pay $2,545 in monthly mortgage. That is down $200 from the $2,713 monthly payments from when the mortgage rates hovered around 7.8%.
How Will the Housing Market Look In 2024?
Redfin is predicting that housing affordability will only see a slight improvement in 2024 following a slump last year. Home sales are expected to increase by 5% to 4.3 million this year, which is a welcome reprieve after sales of existing homes slumped last year. In addition, home prices may fall by 1%, as reported by Business Insider, citing Redfin's chief economist Daryl Fairweather.
Apart from a decline in home prices, home buying costs are also expected to decline as competition for real estate ramps up, pushing some agents and firms to slash their fees in a bid to attract more clients.
"For the first time in Redfin's near-20-year history, our agents reported widespread discounting among our competitors in 2023, if not in the fee publicly offered to the buyers' agent, then in commission refunds or private listing agreements," Fairweather told the outlet.
Already, bidding wars have begun erupting in some parts of the country, with home sellers in certain areas getting between 20 to 30 offers for their listings.
Redfin economists predict mortgage rates to continue hovering in the 6% range this year. However, Fannie Mae, the government-sponsored mortgage company, said it expects the 30-year fixed-rate to drop to 5.8% by the end of the year and fall to 5.5% by the last quarter of 2025.
