Buying a starter home is more affordable; first annual drop since 2020 MABA MassachusettsRealEstate FirstTimeHomeBuyers MaBuyerAgent

 It’s cheaper to buy a starter home today than it was a year ago. A new Redfin report found the amount a homebuyer needs to earn to afford a median priced starter home is down point four percent from last year, marking the first annual decline since August 2020, when mortgage rates were approaching record lows. Redfin found today’s homebuyers need to earn $76,995 annually to afford a $250,000 median priced starter home, and that’s despite starter-home prices increasing four point two percent year over year.

 The reason for the increased affordability is because falling mortgage rates are enough to offset the price increase. In August, the average interest rate on a thirty year mortgage was six point five percent, down from seven point seven a year earlier and the first annual decrease in three years. By Sept. 30, it fell even further to six point eight percent. While the income needed to afford a starter home is down, it’s only three point six percent below last fall’s record high of $79,857.

 “It’s great news that starter homes are becoming a little more affordable, but there’s a catch,” said Redfin Senior Economist Elijah de la Campa. “Starter homes aren’t what they used to be. “A decade ago, a turnkey four-bedroom house in a nice neighborhood was often considered a starter home, but today, a small fixer-upper condo is often all a first-time homebuyer can afford. The American Dream is changing; for many, it no longer involves a house and a white picket fence.”

 According to the report, potential homebuyers shouldn’t wait to see if affordability improves, as it may not, at least in the near future. The Federal Reserve’s recent interest rate cut and its projected future reductions were widely expected, so these changes are largely reflected in current mortgage rates. While the cuts affect short-term rates, long-term rates, such as mortgage rates, often don’t decrease as significantly. Additionally, home prices typically increase over time, so delaying a purchase could result in a higher price and down payment.

 Right now the typical household earns an estimated $83,853 per year, which is eight point nine percent more than what’s needed to afford the median-priced starter home, an improvement from last August when households earned just three percent more than needed. However, Redfin noted it’s also a decline from pre-pandemic levels where, in August 2019, the typical household earned fifty seven point one percent more than needed and in August 2012 that figure was one hundred and thirteen percent more.

The post Buying a starter home is more affordable; first annual drop since 2020 appeared first on Boston Agent Magazine.

 


 

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Article From: "Liz Hughes"   Read full article

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