Home prices are getting slightly more affordable, but down payments are still holding buyers back

• Mortgage rates have fallen from over 7% to 6.19%, saving buyers approximately $200 per month on a median-priced $410,000 home
• Active home listings are 12% higher than last year, though still 6% below pre-pandemic levels
• Eight major cities including Tampa, Phoenix, and Dallas are experiencing negative price growth while homeownership rates dropped to 65%, the lowest since 2019

The U.S. housing market is showing signs of improved affordability, though down payment requirements remain a significant barrier for buyers. Home prices are essentially flat year-over-year at just 0.3% higher according to Parcl Labs, with some markets experiencing declines. Tampa, Phoenix, and Dallas saw the biggest price drops, while Chicago, New York, and Cleveland posted gains.

Mortgage rates have declined significantly to 6.19% for a 30-year fixed loan, down from over 7% at the start of the year. This translates to approximately $200 in monthly savings for a buyer purchasing a $410,000 home with 20% down compared to a year ago.

The typical homebuyer now needs 7 years to save for a down payment according to Realtor.com, an improvement from the 2022 peak of 12 years but still roughly double pre-pandemic levels. This extended timeline is partly due to lower personal savings rates compared to 2020. Homeownership rates fell to 65% in the second half of the year, the lowest since 2019.

Housing inventory is improving with active listings up 12% year-over-year, though still 6% below pre-pandemic levels. This increased supply, combined with better affordability, is driving buyer activity. Pending home sales rose 3.3% in November compared to October and 2.6% year-over-year, reaching the highest level in nearly three years.

Market implications suggest continued momentum as improving affordability conditions attract more buyers. However, the down payment hurdle continues to constrain first-time buyer participation, potentially limiting the pace of market recovery despite favorable rate and price conditions.