The Growing Real Estate Market: Benefits for Homeowners and Challenges for Buyers
The real estate market remains a solid source of wealth for homeowners, while buyers—especially first-time homebuyers—continue to face challenges due to the high cost of housing. According to the latest quarterly report from the National Association of Realtors (NAR), homeowners have seen considerable growth in their equity, but there are also signs of a slight slowdown in price increases, which could offer some relief to buyers.
Homeowners Thriving: Real Estate Wealth Keeps Growing Over the past five years, the average homeowner has accumulated nearly $150,000 in property value. In the third quarter of 2024, almost 90% of major metropolitan areas in the U.S. reported increases in home prices. Some of the standout cities with notable growth include Racine (Wisconsin) and Youngstown (Ohio), where increases reached double digits. Despite this continued growth, the rate of price increase has begun to slow slightly. The national median price for an existing single-family home was $418,700 in the third quarter, reflecting a 3.1% increase compared to the previous year. While some markets have seen price declines, most continue to experience increases, signaling that the market's stability remains strong.
Is Affordability Improving? Although prices continue to rise, mortgage rates have dropped significantly compared to last year. The average rate for a 30-year mortgage is currently 6%, an improvement from 7% in 2023. As a result, the average monthly payment for an existing single-family home has decreased slightly, now standing at $2,137—2.4% lower than in 2023. This is helping buyers manage monthly payments, although affordability remains a challenge. Wages are increasing faster than home prices, suggesting that the worst in terms of affordability may already be behind us.
First-Time Buyers: Is There Relief Ahead? First-time buyers have been the most affected by rising prices, as they cannot rely on selling a previous property to fund their purchase. Their market share has dropped to 24%, a historically low level. However, the NAR report indicates that first-time buyers are seeing slight improvements in affordability. For example, the monthly mortgage payment for a $355,900 home with a 10% down payment fell 5.5% compared to the previous quarter, which could make the market more accessible to more people. Despite this improvement, first-time buyers are still spending a higher percentage of their income on their mortgage. On average, they allocate 38% of their household income to mortgage payments, while other households typically dedicate only 25%.
Markets with the Highest Price Increases Some markets have seen impressive increases in home prices. Among the areas with the highest growth in the third quarter were:
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These markets are experiencing significant growth, offering opportunities for homeowners looking to sell in high-demand areas.
Most Expensive Markets: California Leads the Way California continues to dominate the real estate market with the highest home prices in the country. The following are the most expensive markets in the third quarter:
While prices remain high in these markets, there are other regions of the country where price increases have been more moderate, offering more affordable options for buyers.
The real estate market continues to be a growth engine for homeowners, but it remains challenging for buyers—especially first-time homebuyers. Despite some signs of a slowdown in price increases, affordability is still a hurdle. However, with lower mortgage rates and an increase in housing supply, the outlook is slightly more positive for those looking to enter the market.