So you're ready to buy a new home?
For many Americans, purchasing a home right now may feel like a pipe dream. However, for those who can still afford a home purchase, there is some good news — the real estate market is becoming less competitive.
It all comes down to the Federal Reserve's attempts to bring the economy into equilibrium. As the Fed combats soaring inflation by raising interest rates, it has led to a runup in mortgage rates. That, combined with the pandemic boom in prices, has driven would-be buyers out of the market. As a result, prices in some markets are cooling.
"As affordability wanes, would-be buyers are pulling back from the market, prompting annual house price appreciation to moderate," Mark Fleming, the chief economist at financial corporation First American, told Insider.
With less Americans purchasing homes, prospective buyers are finally beginning to see home price declines in cities across the country — some more than others. Though data from mortgage finance giant Freddie Mac shows the average rate on a 30-year fixed-rate mortgage climbed to 6.29% last week, experts expect that to decline again by next spring as fears of a recession become more real.
"It turns out shoppers in certain parts of the country don't need to wait for the national market to sort itself out — new opportunities to buy the right home are opening up fast," Evan Wyloge, a research analyst at Realtor.com, wrote in a housing report published in September.
To determine what markets present a good deal for homebuyers, Realtor.com analyzed housing data from the nation's 250 largest cities. The company calculated the price a buyer would have to pay per square foot compared with the city's local median income.
Realtor.com also looked at data on how many days a home typically spends on the market in each city, the percentage of sellers slashing their prices, and the amount of homes for sale compared to the total number of homes. Notably, the company limited its list to just one city per state to "ensure geographic diversity."
Its researchers were able to identify that several cities across the country are softening for homebuyers. In Southern or Midwestern cities like Midland, Texas and Cedar Rapids, Iowa — which rank as Realtor.com's top two markets for prospective buyers — Americans are lucking out on their home purchases. Maybe that means you can too.