Prospective homebuyers are seeing their money go a little further these days. A homebuyer with a $3,000 monthly budget now has $40,000 more in purchasing power than they did a few months ago, a Redfin report found.
A potential buyer with a $3,000 monthly payment budget could currently secure a home at $453,000 with a 6.7% interest rate. In October, that same homebuyer could only secure a $416,000 house with an interest rate of 7.8%.
Now that mortgage interest rates have dropped, and home prices have cooled slightly, buyers can stretch their budget. Buyers are also more willing to accept interest rates in the 6% range as they continue to fall lower than last year.
"Bidding wars are picking up as mortgage rates decline and inventory stays low," said Shoshana Godwin, a Redfin Premier agent in Seattle. "I’ve seen a few homes get 15-plus offers recently, and one got more than 30.
"Late last year, many listings sat on the market as buyers sat on the sidelines, hoping for rates to drop," Godwin said. "Now, buyers are snapping up homes because, even though rates haven’t plummeted, people are realizing that the longer they wait to buy a home, the more competition they’re likely to face."
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Down payment assistance programs are becoming more popular at the state and federal levels to improve homeownership numbers across the country.
Freddie Mac recently introduced a $2,500 credit for low-income buyers that can be used for a down payment, mortgage insurance premiums, escrow and other closing costs. Buyers getting home loans through Freddie Mac’s Home Possible and HFA Advantage mortgage products who earn 50% of their area’s median income or less are eligible for the credit.
"This new effort continues the progress we made in 2023 and is particularly important in today’s housing market, where elevated rates and low supply have created affordability challenges for many families," said Sonu Mittal, Freddie Mac senior vice president and head of single-family acquisitions.
Securing a low interest rate can make homeownership more affordable. Visit Credible to start your mortgage application process and compare your rate options without affecting your credit score.
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Some metro areas are growing more affordable than others. Northeastern cities and Midwestern cities are gaining in popularity as home prices drop compared to other major cities.
Toledo, Ohio is one of the most affordable cities in the country, according to a Realtor.com report. Home prices in the area are 51.6% lower in price than the national average.
Rochester, New York is another relatively low-cost area, and No. 3 on Realtor’s most affordable cities list. In October, the average listing price in Rochester was 41.2% below the national average.
California has faced one of the worst housing markets in recent years, largely due to high interest rates and sky-high home prices, but certain areas are set to finally see growth in home sales.
Realtor.com found that five of California's metro areas are expected to see a sales growth of 31.1%, on average, in 2024. These metros include: Oxnard, San Diego, Riverside, Bakersfield and Los Angeles. Many other cities in California faced a 4.1% decline in sales, according to Realtor.com's study.
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