The Average Mortgage Payment Just Declined Sharper Than It Has Since 2020 -- Time for You to Buy a House?

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If it seems like buying a home has continually become more expensive, especially over the last few years, it's because it certainly has. And this has kept many would-be home buyers on the sidelines.

However, there's some good news. It seems like home affordability could be improving. Here's what the latest data tells us, and whether now could be the right time for you to buy a home .

It's getting (slightly) less expensive to own a home

According to a report by Redfin, the median housing payment in the United States declined by 2.7% compared to last year, in the four-week period ending Sept. 15. This is the largest year-over-year decline since May 2020, when the onset of the COVID-19 pandemic sent interest rates plunging. Interestingly, housing payments declined even though the median sale price of a home in the U.S. increased by 3.4% year over year.

Of course, the reason for the decline is that we're finally getting some relief when it comes to mortgage rates. The average 30-year fixed-rate mortgage had a contract interest rate of 6.15% last week, and while that's far greater than it was in the 2020/2021 time frame, it's down significantly from 7.31% in the same week last year, and is the lowest mortgage rate since September 2022.

In a separate report, Redfin also found that home affordability has improved for the first time since 2020. As of August, buyers need an annual income of $115,454 to afford the median-priced home, which is 1.4% lower than a year ago despite prices rising slightly.

Is it time for you to buy a home?

If you've been patiently waiting for homes to get more affordable, this is certainly welcome news. However, there are a few things to keep in mind before you decide to buy.

First, it could still prove to be rather difficult to find a home to buy. Existing home inventories are still near generational lows and are about 40% lower than they were a decade ago. However, as mortgage rates fall, people who have been hanging on to their homes because of their relatively low monthly payment could decide to sell.

Speaking of mortgage rates, most experts are projecting rates to fall below 6% in 2025. While there's no guarantee this will happen, it's important to know that the Federal Reserve is widely expected to continue to lower interest rates for the foreseeable future, and this could have the effect of making mortgage rates fall even further.

On the other hand, don't expect too much relief on home prices. Even with expectations of higher home inventories, many experts predict home prices will be flat or slightly higher in 2025. For example, Zillow's latest forecast calls for the median home value to rise by 1.5% over the next year.

The bottom line

There's no perfect answer to the question of whether or not it's a good time for you to buy a home. In a nutshell, if you can find a home that you love, and you can afford the monthly payments, it could be a smart time to buy -- even if rates continue to fall (after all, you can always refinance later).

On the other hand, if the home inventory shortage or lack of affordability is preventing you from comfortably getting into your dream home, it could be smart to wait.

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