High Q3 Mortgage Rates Offset Lower Home Prices, Vexing First-Time Buyers

This article was first published on NerdWallet.com.

The third-quarter housing market was, yet again, unfriendly to first-time buyers. High mortgage rates moderated any relief from the high prices and scant listings that have dominated the past few years.

The good: The number of homes on the market increased, moving in a direction that makes it less dispiriting to browse a real estate listing app. Also, price growth slowed and even reversed in some markets.

The bad: Mortgage rates soared and are likely to move higher, eating away at the benefits of any price moderation for buyers who have to finance their purchase. And most buyers do.

Affordability improves

Homes became slightly more affordable in the third quarter — across the nation as well as the most populous metro areas. This is largely thanks to prices stalling and in some cases dropping a bit.

Homes were listed at 5.7 times first-time buyer income across the nation and the biggest metro areas, on average. Though better than last quarter, this rate is still far above the 3-times-income benchmark that has been historically used to gauge affordability.

The most affordable and least affordable metros remain largely in two distinct regions: the Rust Belt and West Coast, respectively.

Pittsburgh — where homes are listed at 2.9 times first-time buyer income — continues to be the most affordable metro area in the analysis, joined by Cleveland (3.3), Buffalo, New York (3.5), St. Louis (3.6) and Detroit (3.8).

Places where homes were furthest out of reach include Los Angeles, where homes were listed at 11 times first-time buyer income, and San Diego (9.2), Miami (8.8), San...