Housing affordability across the country saw its second straight monthly improvement in September with a 9.2% annual increase, according to the most recent Real House Price Index (RHPI) report from First American Financial Corp.

This change was driven by a 3.1% upswing in nominal household income and a one-percentage-point annual drop in the 30-year fixed mortgage rate. The two shifts offset the rising costs brought about by ongoing nominal house price appreciation, which has now slowed for nine months yet remains at record highs.

But while the rise in affordability is welcome, First American chief economist Mark Fleming was quick to note that affordability remains historically low.

“Despite the recent improvement, affordability nationally as measured by the RHPI remains 36% below the pre-pandemic historical average,” Fleming said.

With affordability still a challenge, First American’s RHPI report also examined the wealth generation benefits of buying vs. renting, evaluating the potential long-term gains of the decision to buy. The annual cost of owning a home includes taxes, repairs, insurance, and mortgage payments, whereas renting incurs costs limited to the rent paid; however, appreciation helps build equity for homeowners.

For example, assuming a 30-year fixed-rate mortgage with a 5% down payment on a median-priced home, homeowners who purchased at the height of the housing bubble in 2006 have seen a net gain of approximately $169,000, losing equity at first but seeing big gains once home price growth turned positive again in 2012. A renter, on the other hand, would have spent about $229,000 during the same period.

For those who bought homes 10 years ago — the average tenure length for a U.S. homeowner — the cumulative wealth gained amounts to nearly $225,000, while renters during this time faced a loss of about $148,000. Similarly, homeowners who purchased just before the pandemic in 2019 accrued around $158,000 in equity, contrasted with renters’ losses of $89,000.