Buying a home just got more affordable for the first time in 4 years --[Reported by Umva mag]

• The income homebuyers need to afford the typical home just saw its first annual decline since 2020.
• That decline comes as mortgage rates have steadily dipped, a Redfin report says.
• But rates likely won't fall much more as the market has already priced in further Fed easing.

US homebuyers are finally getting a bit of good news.

The income buyers need to afford the median-priced home has dropped by 1.4% in the first annual decline since June 2020, a Redfin report said.

Homebuyers now need an annual income of $115,454 to afford the median priced home of $433,101.

That follows years of declining affordability as mortgage rates soared after hitting historic lows in 2020. The 30-year mortgage rate saw its first annual decline in three years last month, falling to 6.5% from 7.07% the year prior. The rate has now settled at 6.09%.

But buyers are still sticking to the sidelines, Redfin says.

Homebuyers are likely waiting for mortgage rates to fall even further as the Federal Reserve is expected to continue cutting interest rates after its initial big 50 basis point cut last week.

But the market has already priced in cuts, so mortgage rates likely won't continue their downward slide even with further Fed easing, Redfin's researchers say.

"The Fed's latest interest rate cut and its plans for future cuts were highly anticipated, meaning they're already mostly priced into mortgage rates," Redfin economist Elijah de la Campa said.

"When the Fed cuts short-term interest rates, long-term rates like mortgage rates don't always move down nearly as much," he added.

And even with lower borrowing costs, home prices are still at historically high levels, the researchers say.

Redfin considers a home affordable if its monthly mortgage payment accounts for no more than 30% of a buyer's income. But with the typical household earning an estimated $83,853 per year, that's 41.3% of earnings spent on housing to buy the median priced home.

That makes less than one-third of home listings affordable for the typical U.S. household, down from more than half before the pandemic, the researchers say.

But some sellers are slashing prices as they see their homes sit on the market for longer, because even with the annual uptick in affordability, existing home sales have plunged to their lowest since the pandemic.

The researchers say now is likely a good time to enter the market, because the slightly improved affordability conditions might not last for that long.

"Housing affordability is improving for the first time in four years, so if you want to buy a home and can afford to, now could be a good time because it's unlikely to become markedly cheaper in the near future," de la Campa said.

Buyers might look in particular at Texas, where three metros—Austin, San Antonio, and Fort Worth—were among the top five US cities seeing the biggest rises in home affordability.

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