In November, the housing market continued to showcase its resilience with steady home price growth, driven partly by lower interest rates providing a glimmer of hope for homebuyers. According to ICE Vice President of Enterprise Research Andy Walden, while annual home price growth maintained an upward trajectory, it's worth noting that this surge is partly a result of falling prices in late 2022 and robust growth earlier in the year.
“While annual home price growth continued to climb in November, much of that is being driven by residual effects of falling prices in late 2022 and the strong growth seen earlier this year,” said Walden. “Price growth has been much more modest in recent months, which should help to moderate that annual growth rate as we make our way through early 2024.”
This rate relief has positively impacted both home affordability and purchase demand. Walden said it now requires $279 less per month to purchase a median-priced home compared to late October. Consequently, mortgage applications have surged to their highest adjusted levels since early September. But they fell off again over the holiday season by 9.4%, according to the Mortgage Banker's Association.
Regionally, home prices displayed variation. Markets in the Northeast, particularly Hartford, Connecticut, and Providence, Rhode Island, led the pack with the most substantial gains on a seasonally adjusted basis. Conversely, nearly a quarter of markets experienced declines in seasonally adjusted prices, with Portland, Oregon, and Minneapolis, Minnesota, leading the way.
While the housing market grapples with affordability challenges, the recent drop in interest rates has provided some much-needed relief for prospective homebuyers, making homeownership more accessible than it has been in months.
With 30-year rates at 6.61% as of Dec. 28, according to Freddie Mac’s Primary Mortgage Market Survey, it now requires 35.9% of the median household income to afford the principal and interest payment on the median-priced home, down from a peak of 40.3% less than two months ago, making homebuying the most affordable it’s been since May.
