Mortgage rates are falling, which could mean some housing markets will become much more affordable.
New analysis of Real estate agent.com has revealed the metropolitan areas where affordability for the average wage earner will improve the most if mortgage rates fall below a certain level.
The average 30-year fixed mortgage rate has fallen to 6.46 percent, according to Freddie Mac’s latest data as of Aug. 22. But experts say it could fall further to 6.3 percent in the coming months.
Monthly savings on housing payments from lower mortgage rates would be enough to put a significant amount of additional housing within reach of the typical buyer in some major cities and former pandemic-era boomtowns.
The biggest winner would be Lakeland, Florida, which would see the biggest increase in affordable housing listings if mortgage rates fell, Realtor.com found.
The biggest winner would be Lakeland, Florida, which would see the biggest increase in affordable listings if mortgage rates fell, Realtor.com found.
Realtor.com calculated how many more homes would be affordable to the average local buyer if mortgage rates fell to 6.3 percent by the end of the year, from the July average of 6.8 percent.
Assuming a 10 percent down payment, the real estate site calculated the proportion of active listings in each market that would be affordable with the two different mortgage rates, also taking into account local tax and insurance rates.
Affordable monthly payments are calculated as 2.5 percent of local median annual income.
The gain in affordability is expressed as the difference in percentage points in the affordability ratio before and after a rate cut.
Lakeland, which is located near Tampa and Florida, would see its share of affordable listings increase by 5.9 percentage points to 52.9 percent, according to the analysis.
That’s nearly double the 3.2 percentage point increase in affordability nationwide for the same rate reduction.
Years of demand have driven up home prices in the area, known for its wildlife and architecture.
Second on the list was Salt Lake City, Utah, where the share of affordable homes would increase by 5.7 percentage points if mortgage rates fell to 6.3 percent.
El Paso, Texas, ranked third on the list, up 5.4 percentage points, while Raleigh, North Carolina, ranked fourth with an increase of 5.2 percentage points.
Two other Florida cities also made the top 10: Deltona in fifth place and Palm Bay in eighth place.
Among the biggest beneficiaries of affordability due to falling mortgage rates are also Providence, Rhode Island, home to Brown University, Ogden, Utah, and New Haven, Connecticut.
Also on the list, at number seven, was Boise City, Idaho.
Its extensive ski resorts, low cost of living and vast hot springs drew an influx of homebuyers to the city during the pandemic.
That’s driven up home prices in the so-called Covid-era “boomtown,” with the median list price in July at $599,450, according to Realtor.com.
But the analysis found that a drop in mortgage rates could increase the number of homes affordable to the average local buyer by 4.9 percentage points.
“These are markets where many homes are currently out of reach for the average wage earner,” said Realtor.com senior economist Joel Berner.
‘In these top-tier markets, there is a concentration of homes that are on the edge of affordability.’
Realtor.com calculated how many more homes would be affordable to the average local buyer if mortgage rates fell to 6.3 percent by the end of the year.
Second on the list is Salt Lake City, Utah, where the share of affordable properties for sale would increase by 5.7 percentage points if mortgage rates fell to 6.3 percent, according to Realtor.com.
Home prices rose in Boise City, Idaho, after an influx of Americans arrived there during the Covid-19 pandemic
Meredith Whitney said mortgage rates need to reach 6 percent or less to revive the frozen market
In other areas, however, experts warn that mortgage rates would have to fall even further for the housing market to move.
The “Oracle of Wall Street,” Meredith Whitney, has said rates must fall below 6 percent.
Whitney, who earned his nickname after predicting the global financial crisis, said home prices also need to fall by a tenth for there to be a material difference in affordability.
Mortgage rates at decades-high levels and record home prices mean the average home loan payment this year is double what it was in 2000, he said.
“If mortgage rates fall below 6 per cent, you will see an increase in both home equity generation and home sales,” he told DailyMail.com.
“When volume starts to come into the market, prices will drop and the cycle will perpetuate.”