An economist says that housing affordability is improving.

• The Mortgage Bankers Association's Purchase Applications Payment Index shows that mortgage application payments decreased by 2.4% in June, from $2,219 in May to $2,167.
• Homebuyer affordability conditions are beginning to improve, according to experts.

A recent report indicates that home affordability for buyers has slightly improved this summer.

In June, the median new mortgage payment decreased by 2.4% from May, to $2,167, according to new data from the Mortgage Bankers Association. This index tracks how new monthly mortgage payments change over time, in relation to income.

An increase in borrower affordability can occur when loan application amounts and mortgage rates decrease, or homebuyer earnings grow, resulting in a decrease in the index.

The housing market is becoming more affordable for homebuyers as mortgage rates continue to decline, increasing their purchasing power and attracting some borrowers back into the market, according to Edward Seiler, MBA's associate vice president of housing economics.

The Fed's interest rate cut is imminent. Homeowners and buyers must take note. Home insurance premiums increased by 21% last year, partly due to climate change. "Climate gentrification" is driving up prices for longtime Miami residents.

The National Association of Realtors' chief economist and senior vice president of research, Lawrence Yun, views positive signs for homebuyers.

He stated that although housing affordability is improving slightly, it is heading in the correct direction.

'The bigger picture' shows payments are still high

The median loan amount on new applications decreased to $320,512 in June from $325,000 in May, indicating that home-price growth is slowing down, according to MBA data shared with CNBC.

Yun stated that a slight decrease in mortgage rates in June positively impacted buyers.

According to Freddie Mac data via the Fed, the 30-year fixed rate mortgage decreased from 7.22% on May 2 to 6.78% on July 25.

The typical monthly mortgage payment has essentially doubled from pre-Covid years, with a $1,000 mortgage payment being the norm before Covid and now above $2,000, he said.

Yun stated that while the increase in the bigger picture is significant compared to pre-Covid conditions, it represents only a slight improvement on a month-to-month basis.

More sellers, less competition for buyers

Yun stated that investors believe the Federal Reserve may reduce interest rates by three in the second half of the year, which would enhance housing affordability.

Experts agree that although the housing market is not yet a buyer's market, the increase in supply and decrease in rates create favorable conditions for buyers.

Chen Zhao, the economic research lead at Redfin, an online real estate brokerage firm, stated that the market is shifting more towards buyers.

Zillow senior economist Orphe Divounguy stated that while there is still an affordability challenge, the market is "moving towards a more neutral position."

As more listings become available, buyers are becoming more selective. The total housing inventory at the end of June was 1.32 million units, which is a 3.1% increase from May and a 23.4% increase from the previous year, according to NAR. The unsold inventory is currently at a 4.1-month supply, which is an increase from the 3.7-month supply in May and the 3.1-month supply a year ago.

Yun stated that it's good news for the buyer side because there's a lower chance of being involved in a bidding war.

The South is experiencing the fastest easing of competition, with all major southern markets except Dallas and Raleigh being either neutral or buyer-friendly, according to the June 2024 Zillow Housing Market Report.

Selma Hepp, chief economist at CoreLogic, stated that having more inventory does provide buyers with more options. However, this is only true regionally. The areas with the most inventory increases are facing other challenges, such as high insurance costs.

Some sellers are cutting prices to attract buyers, said Divounguy.

"To attract buyers, sellers are resorting to lowering their prices, with one in four doing so in June 2021, the highest percentage in the past six years."

In June 2021, approximately 19.8% of homes for sale experienced a price reduction, marking the highest percentage on record, according to Redfin. This represents an increase from 14.4% in June 2020.

Yun advised that while sellers strive to charge the highest prices, they should also be aware of the intense competition.

Builders are increasing their efforts to attract buyers by cutting prices, with 31% of builders doing so in July 2024, up from 29% in June and 25% in May, according to a survey by the National Association of Home Builders.

Yun stated that the top priority for buyers is to adhere to their budget, even if mortgage rates decrease.