The Median Home Price Finally Dropped. Here's What It Looks Like Today
- The median existing home sale price was $403,800 in July.
- Though that's not a small number, it's a decline from June.
- If you're looking to buy, calculate if you can comfortably afford a mortgage payment using the 30% rule.
Are buyers finally in for a break?
For months on end, it seemed like home prices were going nowhere but up. And buyers were being forced to stretch their budgets and take on higher mortgages just to snag a place of their own.
But some encouraging news emerged from the National Association of Realtors in August. It analyzed July data and found that the median existing home sale price came to $403,800 that month.
Now on the one hand, that does represent a 10.8% increase from July 2021. But it also represents a $10,000 decrease from June of 2022, when the median existing home sale price was $413,800. So all told, this news should be encouraging to buyers.
However, that doesn't mean homes today are affordable. And if you're looking to buy one, you'll need to do some serious number-crunching to see if it's doable.
Can you afford the median home today?
Maybe $403,800 falls within your home-buying budget. Or maybe it's way outside it. If you're not sure, it's important to consider the 30% rule.
This rule states that your monthly housing costs, including your mortgage payment itself, property taxes, insurance, and other predictable housing expenses, should not exceed 30% of your take-home pay. What's more, your total mortgage payment hinges not only on the price of your home, but also on the interest rate you lock in on your loan and the amount of money you bring to the table in down payment form.
But all told, you shouldn't be spending more than 30% of your take-home pay on housing. So if buying a home worth $403,800 forces you to do that, then you should seriously consider putting your homeownership plans on hold.
That said, just because the median home sale price in July was $403,800 doesn't mean that you're looking at homes in that range. Where you live, it may be possible to purchase a comfortable home for $300,000 -- or $275,000.
The point, however, is that it's important to run the numbers when deciding whether or not to move forward with a home purchase. And it's also important not to rush into making an offer just because home prices seem to be on the way down.
Will home prices continue to drop?
There's reason to believe they will, albeit slowly. But to be clear, there's a difference between lower home prices and affordable home prices. We still have a ways to go before home prices reach moderate enough levels to qualify as the latter. And while it's a good thing for buyers that the median home sale price dropped in July, it may be premature to celebrate. It also may be too soon to seriously consider making an offer.
In fact, home price movement will largely depend on housing inventory. In the past few months, that's picked up a lot. But we'll need to see a larger uptick in available homes for property prices to really drop down to more affordable levels.
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