US Housing Affordability Hits Three-Decade Low with Mortgage Rates at 8%

Housing experts predict slight relief over the next year, but first-time buyers accounted for just 26% of US home purchases, the lowest share since 1981.

The US housing affordability is at its lowest in over three decades, with the average 30-year fixed mortgage rate hitting 8%, the highest level since 2000. Factors such as high borrowing costs and a spike in US incomes are contributing to the lowest US mortgage affordability since at least 1989.
First-time buyers made up just 26% of US home purchases last year, the lowest share since data collection began in 1981. Falling interest rates, price cuts to homes, and new home construction could provide relief over the next year, though these factors remain uncertain.
Housing experts predict the Federal Reserve to lower interest rates in the second half of 2024 which could lead to modestly lower mortgage rates. However, waiting for rates to fall before entering the housing market could result in a surge of buyers and potential bidding wars.
Despite high interest rates, some experts argue that homeownership can still be a good investment, especially for those willing to hold onto a property for a long time. The general advice for potential buyers is to only lock down a home they can comfortably afford with their monthly mortgage payment.
Zillow economists have predicted a 2.1% rise in home prices between September 2023 and September 2024 due to an uncharacteristic dip in September and steadily climbing mortgage rates. Even as sales have decreased, property prices continue to rise due to competition for the relatively few houses up for sale.
The existing-home sales dropped a significant 15% in September compared to the previous year, marking the lowest figure in 13 years. This is a result of surging mortgage rates, low inventory levels, and elevated home prices, leaving fewer and fewer properties for potential buyers.