Anticipated declines in mortgage rates could lead to greater improvements in home affordability in certain regions.
Almost Certain Mortgage Rate Decrease
According to a recent analysis by Realtor.com, specific metropolitan areas are projected to experience the most significant boost in affordability if rates decrease to 6.3%, a scenario that may materialize soon.
These anticipated lower mortgage rates could make more homes accessible to typical homebuyers in select U.S. locations, but how close to Baltimore will we see a difference?
If mortgage rates decrease to 6.3% from the July average of 6.8%, Lakeland, FL would experience the most significant increase in affordable listings, rising by 5.9 percentage points to reach 52.9%. This surpasses the national average increase in affordability of 3.2 points. Deltona and Palm Bay are among the other Florida cities in the top 10, while in Utah, Salt Lake City and Ogden also saw notable gains in affordability due to declining mortgage rates. Also included in the list were El Paso, TX, Raleigh, NC, Providence, RI, and Boise, ID. New Haven, CT barely made it to the list at No. 10, after holding the same position in a recent list of top metro areas where lower rates could stimulate more seller activity.
How affordability is calculated
The economic research team at Realtor.com predicts that mortgage rates will decrease to 6.3% by the end of the current year, so to identify where the reduction in rates would have the most significant impact on home affordability, we need to analyze the monthly home payments that would be manageable for the median earner in each of the top 100 U.S. metro areas by population. The affordable monthly payments are determined as 2.5% of the local median annual income, which translates to housing payments representing 30% of income annually. Considering a 10% down payment, you have to evaluate the portion of active listings in each market that would be within reach at mortgage rates of 6.8% and 6.5%, factoring in local tax and insurance rates. The enhancement in affordability is measured by the difference in the percentage of listings that are affordable before and after the rate decrease.
Home Affordability: Where Can You Get The Most For Your Money?
$495,000 in New Haven, Connecticut
So, it looks like if you live in Baltimore and you want to reap the biggest benefits of affordability once the mortgage rates drop, you'll have to head south or up to New England, or make a big move and go west! What do you think? Would you choose one of these cities to live for any reason??
Reach out with any real estate questions, as always, claudia@theoharagroup.com
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