Lower mortgage rates in September briefly increased affordability, allowing middle-income households to afford more homes than in any month since early 2023, according to a new analysis by Zillow.
However, rising mortgage rates in October reversed some of that progress, underscoring the volatile nature of the housing market.
Mortgage rates fell to an average of 6.18 percent in September, the lowest in two years. This allowed a household earning the median U.S. income to comfortably afford 27.7 percent of homes listed for sale, the highest share since February 2023. By contrast, in May, when rates averaged 7.06 percent, only 22.7 percent of homes were within reach for a middle-income household.
“Affordability remains the top challenge for first-time homebuyers especially, and buying power can change quickly with the unpredictable nature of mortgage rates,” Orphe Divounguy, senior economist for Zillow Home Loans, said in a release. “While there’s no guarantee, signs point to rates moving a bit lower into next year. However, the path will be bumpy, and buyers should stay ready to move forward when the time is right for them.”
By mid-November, mortgage rates had risen to 6.78 percent, showcasing how quickly homes can move in or out of a buyer’s budget.
Despite the October increase in mortgage rates, which averaged 6.43 percent, the share of affordable listings for middle-income households was higher than a year earlier in all of the nation’s 50 largest metro areas.
Twelve metro areas boasted affordability for more than half of homes listed in September. Pittsburgh led the list, with 72.1 percent of homes affordable for middle-income buyers, followed by St. Louis (64.2 percent), Buffalo, N.Y. (63.7 percent), and Detroit (61.5 percent).
Markets in the Sun Belt experienced significant year-over-year gains in affordability. Austin, Texas, saw the largest increase, with 13.2 percentage points more affordable homes compared to last year. Other major gains were recorded in Raleigh, N.C. (+12.4), San Antonio (+12.2), Phoenix (+12.1) and Minneapolis (+11.9).
Meanwhile, affordability remained a challenge in several large metros, particularly cities in California and parts of the Northeast.
In October, less than 15 percent of listings were affordable for middle-income households in Los Angeles (1.6 percent), San Diego (4.2 percent), San Jose, Calif. (7.2 percent), Sacramento, Calif. (10.5 percent), the New York City metro area (11.4 percent), Boston (11.6 percent), Riverside, Calif. (12.6 percent), and San Francisco (14 percent).