The year ended on a disappointing note for many American homebuyers – less than 16 percent of homes for sale in 2023 were affordable for average local earners, according to a study by Redfin. That's the lowest since at least 2013, the year Redfin began tracking prices, when 50 percent of homes were affordable to the average local earner. In 2019, before the pandemic, 40 percent of listed homes were affordable. In 2022 it was only 21 percent.
For the study, researchers defined “affordability” as housing that costs no more than 30 percent of income. They assumed a relatively low down payment of 5 percent, a 30-year fixed-rate mortgage at the interest rate of the month the home went on the market, as well as homeowner's insurance and private mortgage insurance. The study examined prices and incomes in the 97 most populous U.S. metropolitan areas.
The U.S. Census Bureau's American Community Survey was used to analyze income data, and its demographic breakdown revealed deep racial disparities in home buying: Only 7 percent of homes were affordable to median-income Black households, and 10 percent were affordable to median-income Hispanic/Latino households . But 22 percent of listings were affordable to middle-income white households and 27 percent were affordable to middle-income Asian households.
This is no surprise given higher interest rates and low inventory levels in 2023. But in some areas, particularly in the Midwest, a much larger share of homes were affordable to all. Detroit and the Ohio metropolises of Akron and Dayton had the highest proportion of affordable homes for average earners – about 50 percent. But in the West, in wealthy metropolises like San Francisco, Los Angeles and Oxnard, California, fewer than one in 300 landmarked homes was affordable to the average household.
The good news is that housing affordability is expected to improve in 2024 as mortgage rates fall and more homes come onto the market.
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