Homebuying Affordability Predictions for 2024 (2024)

If you’re looking for a new home right now, you’re probably feeling the pinch of high housing prices. For someone making the median income in the U.S., homes are currently just out of reach financially. ¹

Homebuying Affordability Predictions for 2024 (1)

So, when will homes become more affordable for the average American homebuyer?

It isn’t easy to determine. Different economic influences play a role, and affordability varies widely depending on where you live. But it’s smart to keep a pulse on housing market conditions, and when the time comes for you to jump on your dream home, choosing a lender that cares about your goals and long-term success can save you money, time and stress.

For quick insight into how much you can afford, check out our Affordability Calculator!

How Affordable Are Homes Now?

The reality is… it’s a stretch for the average American to afford the average American home.

Several regularly updated measures of housing affordability, such as the index modeled by National Association of Realtors® and the Federal Reserve Bank of Atlanta®’s Home Ownership Affordability Monitor, find that the median income in the U.S. can’t quite cover the monthly cost of a median-priced home without being considered “cost burdened.”²

One major reason is that there simply aren’t enough homes in the U.S. right now for everyone who wants one, according to a recently released analysis by Zillow®.³ This housing shortage has been growing for years, and first-time homebuyers and those with lower incomes are impacted the most by a lack of affordable housing.⁴

Even for those who have saved up enough for a down payment, current mortgage rates can seem discouraging. As of August 8, 2024, interest on a 30-year fixed rate mortgage sat at 6.47 percent. When rates breached 7 percent in 2023, it was the highest they’d been in 20 years.⁵

Here’s your bright side… slowing home sales mean that more resale inventory has hit the market, which has slowed the rate of home price growth.⁶Still, if the current housing market is daunting for you as a homebuyer, you’re not alone. Special financing solutions have even been designed in response to these factors so that more buyers can access the market.

What to Expect in the 2024 Housing Market

For affordability to improve, more homes need to become available for sale.

Mortgage rates are curbing the number of existing homes entering the market, because homeowners locked in at a lower mortgage rate aren’t eager to sign on to a higher one.⁶

Mortgage rates probably won’t come down until the Federal Reserve Board votes to drop the federal funds rate, which is the interest range that commercial banks use to lend to each other. The board ramped up the rate in 2022 in an attempt to curb runaway inflation.⁷ Fast forward to now, and inflation is down to a moderate 3 percent.⁸ However, the Fed has signaled they won’t lower the federal funds rate until inflation falls to their target of 2 percent.⁹Investors expect that the Fed could lower rates in September of this year.¹⁰

Newly built homes aren’t high in supply, either, as new home construction is muted, per June data from the U.S. Census Bureau.¹¹ Builder confidence has been dragged down by, you guessed it, current mortgage rates.¹² But again, there’s a silver lining: a quarter of builders brought down their prices in May.⁶

Ultimately, a lot is riding on the federal funds rate. Once the Fed lowers it—potentially this September, as expected by the market—a chain reaction could take place:¹⁰

1. First, mortgage rates would fall.

2. Then there’s a good chance many buyers would jump into the market, driving up housing prices.

3. This might encourage builders and developers to ramp up home construction, tempering housing prices.

Bear in mind that the above scenario doesn’t account for other factors like government policy and employment.

Mortgage Options for First-Time Homebuyers in 2024

Homebuying Affordability Predictions for 2024 (2024)

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