Low rates, higher affordability
The recent drop in mortgage rates has caused a spike in overall housing affordability. According to a new analysis, the market’s low rates have made a larger share of homes more affordable for the average buyer – especially in markets like Dallas and Portland.
A boost to housing affordability
There’s now a silver lining to today’s inventory–strapped market. According to a new analysis from real estate brokerage Redfin, the recent dip in mortgages rates – which reached 3.29% earlier this month – has made an increasingly larger share of homes more affordable.
The analysis takes a $2,500 mortgage payment, revealing just how many homes fall under that price point in the nation’s biggest markets. The low rates have made the biggest difference in Dallas, where nearly 76% of all homes on the market have a $2,500 mortgage payment or less. Last year, the share was just 69.6%.
Portland has also seen a big jump, with the share of $2,500–and–under homes rising from 49.1% to 55.1%. Richmond, Virginia; Milwaukee; and San Diego rounded out the top five.
It’s not all good news, though. Despite low rates, cities like Phoenix, Las Vegas, and Orlando actually saw shares of affordable housing decline in recent weeks. The number of homes with a $2,500 payment or less fell 3.6 percentage points in Phoenix and 3.4 points in Vegas.
Housing affordability on the rise
Drilled down, the impact rates have had on housing affordability is significant. Redfin’s analysis shows that at today’s low rates, a buyer shooting for a $2,500 mortgage payment could buy a house priced $51,250 higher than just a year ago.
For buyers looking at a strict price point, the numbers look just as good. A buyer seeking a $457,000 home would have paid $2,500 per month a year ago, but given today’s rates, they’d pay just $2,250 today.
Here’s how Redfin’s chief economist Daryl Fairweather explains it: “Potential homebuyers now have an extra incentive to buy a home despite all of the economic uncertainty from the coronavirus. Many current homeowners now have the option to refinance their mortgages and gain some extra spending cash each month. Low interest rates won’t help with direct impacts of the coronavirus on the economy – like declines in tourism and service sector spending, but they will mitigate impacts to housing.”
Get today’s mortgage rates
Another way to make your home purchase more affordable? Make sure to shop around for your mortgage. Freddie Mac data shows that it can save you up to $3,000 in the long run.