03:29 PM EDT, 09/24/2024 (MT Newswires) -- Housing affordability in the US improved in August amid declining mortgage rates, though the typical household is still earning way less than the amount required to afford a home, Redfin (RDFN) said Tuesday.

The annual income needed to afford a median-priced home fell 1.4% year over year to $115,454 last month, the first drop since June 2020, when mortgage rates fell to a record low, the real estate brokerage said in a report. Mortgage rates saw the first annual decrease in three years in August, with the average interest rate on a 30-year mortgage falling to 6.5% from 7.07% a year earlier. Redfin said rates have now reached 6.09%.

"Housing affordability is improving for the first time in four years, so if you want to buy a home and can afford to, now could be a good time because it's unlikely to become markedly cheaper in the near future," Senior Economist Elijah de la Campa said.

The typical household's annual earning is estimated at $83,853, which the brokerage said is 27% less than what's required to afford the typical home. Some 31% of home listings are affordable for the typical US household, down from more than 50% before the coronavirus pandemic, according to the report.

Redfin said it considers a home affordable if a buyer spends up to 30% of their income on their monthly housing payment.

In Austin, Texas, buyers needed to earn $133,346 annually in August to afford the median-priced home, down 7.9% year over year and the largest drop among the 50 most populous US metropolitan areas tracked by Redfin. Philadelphia saw the biggest increase, with buyers required to earn $82,447, up 5.8% from a year earlier, according to the report.

Mortgage rates are unlikely to drop notably "anytime soon" because the Federal Reserve's interest-rate cut on Wednesday and its plans for future policy easing are likely already priced into rates, de la Campa said. "When the Fed cuts short-term interest rates, long-term rates like mortgage rates don't always move down nearly as much."

Prospective homebuyers who opt to wait could end up paying a higher down payment as prices tend to increase over time. Home prices are already up 3% from a year earlier and only 2.1% below their all-time high amid an inventory shortage, Redfin said.

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