Prices stabilize as rates fall
Mortgage rates have declined, home prices are easing, and more properties are coming onto the market, improving affordability conditions for US homebuyers. Despite these shifts, saving for a down payment remains the primary obstacle for first time buyers.
National home prices are broadly flat compared with a year earlier. Data from Parcl Labs show prices briefly moved into negative territory earlier this month and are now just 0.3% higher year over year.
Wide differences across metropolitan markets
The latest S&P Cotality Case-Shiller home price index, reflecting prices through October, highlights sharp regional contrasts. Among the 20 largest metropolitan areas tracked, Chicago, New York, and Cleveland recorded the strongest gains.
At the same time, eight cities posted year over year price declines, with Tampa, Phoenix, and Dallas experiencing the steepest drops.
Home prices lag inflation in real terms
Housing appreciation continues to trail broader consumer inflation. October consumer price inflation is estimated at around 3.1%, roughly 1.8 percentage points above the latest annual home price gains.
This gap suggests a modest decline in inflation adjusted home values over the past year, easing pressure on buyers in real terms.
Mortgage rates bring meaningful savings
The average rate on a 30 year fixed mortgage has fallen to about 6.19%, down from above 7% at the start of the year. Lower rates are translating into tangible monthly savings for buyers.
For a purchaser putting 20% down on a $410,000 home, close to the national median, the monthly mortgage payment is now roughly $200 lower than it would have been a year ago.
Down payments remain the biggest barrier
Despite improved affordability metrics, down payments remain the largest hurdle to homeownership. The typical buyer now needs about seven years to save for a down payment, down from a peak of 12 years in 2022 but still about double pre pandemic levels.
Homeownership fell to 65% in the second half of the year, the lowest rate since 2019, underscoring the ongoing challenge faced by first time buyers.
Inventory growth lifts market activity
An increase in homes for sale is adding momentum to the housing market. Active listings are approximately 12% higher than a year ago, although they remain about 6% below pre pandemic levels.
Buyer response has been positive. Pending home sales rose 3.3% in November from October, were 2.6% higher than a year earlier, and reached their highest level in nearly three years.
Affordability draws buyers back
Improved affordability, driven by falling mortgage rates and wage growth outpacing home prices, is encouraging more buyers to re enter the market. Greater inventory compared with last year is also supporting renewed demand.
