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The 10 housing markets which are set to become affordable as mortgage rates drop
Mortgage rates are on the decline, which could mean some housing markets are set to become much more affordable.
New analysis from Realtor.com has revealed the metro areas where affordability for the average earner will improve the most if mortgage rates drop below a certain level.
The average 30-year fixed rate mortgage has fallen to 6.46 percent, as of latest Freddie Mac data from August 22. But experts say it could dip further to 6.3 percent in the coming months.
The monthly savings on house payments from lower mortgage rates would be enough to bring a significant number of additional homes into reach for the typical homebuyer in some major cities and former pandemic-era boomtowns.
The biggest winner would be Lakeland, Florida, which would see the biggest increase in affordable 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 become affordable for the average local buyer if mortgage rates fell to 6.3 percent by the end of the year - from July's average of 6.8 percent.
Assuming a 10 percent down payment, the real estate site calculated the share 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 the local median annual income.
The gain in affordability is expressed as the percentage-point difference in affordability share before and after a rate drop.
Lakeland, which is situated close to Tampa and Florida, would see its share of affordable listings increase by 5.9 percentage points to 52.9 percent, the analysis found.
That is almost double the 3.2 percentage point increase in affordability nationwide for the same rate decrease.
Years of demand had pushed up home prices in the area, which is known for its wildlife and architecture.
Second on the list was Salt Lake City, Utah, where the share of affordable listings would go up by 5.7 percentage points if mortgage rates fell to 6.3 percent.
El Paso, Texas, ranked third on the list, with a 5.4 percentage point increase, while Raleigh, North Carolina, was fourth with a 5.2 percentage point hike.
Two other Florida cities were also included in the top 10 - Deltona in fifth place and Palm Bay in eighth place.
Also among the top affordability gainers from falling mortgage rates were Providence, Rhode Island, which is home to Brown University, Ogden, Utah, and New Haven, Connecticut.
Also on the list, coming in at number seven, was Boise City, Idaho.
Its expansive ski resorts, low living costs and vast hot springs attracted an influx of homebuyers to the city during the pandemic.
This drove up house 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 fall in mortgage rates could increase the number of affordable homes for the average local buyer by 4.9 percentage points.
'These are markets where a lot of homes right now are just out of reach for the median earner,' said Realtor.com senior economist Joel Berner.
'In these top markets, there is a concentration of homes that are right on the cusp of affordability.'
Realtor.com calculated how many more homes would become affordable for the average local buyer if mortgage rates fell to 6.3 percent by the end of the year
Second on the list was Salt Lake City, Utah, where the share of affordable listings would go up by 5.7 percentage points if mortgage rates fell to 6.3 percent, according to Realtor.com
Boise City, Idaho, saw house prices surge after an influx of Americans flocked there during the Covid-19 pandemic
Meredith Whitney said that mortgage rates need to hit 6 percent or below in order to kickstart the frozen market
In other areas, however, experts warn mortgage rates would need to fall further in order to get the housing market moving.
The 'Oracle of Wall Street' Meredith Whitney has said rates need to drop below 6 percent.
Whitney, who earned her nickname after predicting the global financial crisis, said house prices must also drop by a tenth in order to make any material difference in affordability.
Decades-high mortgage rates and record house prices mean the average payment on a home loan this year is double what it was in 2000, she said.
'If mortgage rates go below 6 percent, you will see a spike in both home equity originations as well as home sales,' she told DailyMail.com.
'When volume starts to hit the market, prices will go down, and the cycle will be self perpetuating.'