More Affordable Homes: A Growing Trend in 2024

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In a surprising turn of events, the housing market is seeing a rise in more affordable homes. Despite high mortgage rates, lofty home prices, and limited selection, there is a small yet significant positive trend emerging. Recent report shows an increase in the availability of affordable homes, bringing some much-needed relief to prospective buyers.

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The Rise of More Affordable Homes

According to Realtor.com, the national median listing price in May increased by 0.3% to $442,500 compared to the previous year. However, the price per square foot rose by a more substantial 3.8%. Since May 2019, the median listing price has jumped by 37.5%, while the price per square foot soared by 52.7%. This disparity indicates that more affordable homes are becoming available on the market.

Realtor.com’s chief economist, Danielle Hale, explains, “The share of inventory of smaller and more affordable homes has grown, which helps hold down the median price even as per-square-foot prices grow further.” This is a welcome development for buyers who have been struggling with high prices and limited options.

What Defines an Affordable Home?

In May, the housing market saw a 35.2% increase in homes for sale compared to the previous year, marking the seventh consecutive month of rising inventory. Notably, there was a 46.6% increase in homes priced between $200,000 and $350,000, surpassing the previous month’s high of 41.0%. This growth in affordable homes outpaced all other price categories from February through May.

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Regional Trends in Affordable Homes

Every region in the U.S. experienced gains in housing inventory in May. The South saw a 47.2% increase in listings, the West 34.5%, the Midwest 20.5%, and the Northeast 9.4%. All 50 of the largest metro areas saw active listings rise from the previous year. Tampa, Phoenix, and Orlando led the way with the highest growth in inventory, reporting increases of 87.4%, 80.3%, and 78.0%, respectively.

However, only 12 metro areas saw inventory exceed pre-pandemic levels, with the majority located in the South and West, including Austin (33.6%), San Antonio (31.8%), and Denver (22.0%).

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Challenges Still Exist

Despite the increase in more affordable homes, buyers still face significant challenges. Home prices remain much higher than pre-pandemic levels, and higher mortgage rates are adding to the financial burden. In May, the typical monthly mortgage payment for the median home grew by approximately $158 compared to the previous year, increasing the required household income to purchase the median-priced home by $6,400 to $119,700.

Realtor.com emphasizes that the increase in prices could price out some buyers, particularly those whose household incomes have not grown at a similar rate. This highlights the ongoing affordability issues even as the market sees a rise in more affordable homes.

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The trend of more affordable homes entering the market provides a glimmer of hope for prospective buyers. While challenges remain, particularly with high prices and mortgage rates, the increase in smaller and more affordable homes is a positive sign. As the housing market continues to evolve, buyers may find more opportunities to secure a home that fits their budget.