Most Americans can't afford to buy the homes listed for sale in the U.S., real estate brokerage Redfin said in a report Thursday.
An analysis of listings in 97 of the country's most populous metropolitan areas found that only 15.5% of homes for sale in 2023 were affordable for the typical U.S. household. That's a decrease from last year, when Redfin found that 21% of homes listed for sale were affordable for the typical buyer.
Redfin defines affordability based on the estimated mortgage payment being 30% or less of the average monthly income of local county residents.
Redfin isn't the only real estate company highlighting housing affordability issues. Earlier this year, the National Association of Realtors revealed that middle-income households, or households earning up to $75,000 a year, can afford only 23% of the homes listed for sale in the United States
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Researchers at real estate data provider ATTOM examined average home prices for about 575 U.S. counties last year and found that home prices in 99% of those areas were unaffordable for the average earner, which ATTOM defined as someone making $71,214 a year.
What are the causes of affordability issues?
Houses were in short supply this year. In June, Realtor.com announced that the number of homes for sale in 2023 decreased in 21 of the 50 largest metro areas compared to the same period last year.
A rise in mortgage rates this year also led to fewer homeowners putting their properties up for sale amid fears they would have to buy a new home at an interest rate of 7% or more – more than double the typical rate during the pandemic , MoneyWatch reported. Low inventory means buyers are competing for a limited pool of homes, driving up prices.
Will homes be more affordable in 2024?
There is some good news for next year. According to Realtor.com, housing inventory rose 7.5% year-over-year in November. The more homes there are on the market, the greater the competition, which can potentially cause property prices to decline.
Mortgage rates are slowly falling after falling to their highest level in more than two decades this year. The 30-year fixed-rate mortgage remained below 7% for the second week in a row, Freddie Mac said Thursday. The downtrend comes after 17 consecutive weeks above 7%.
“Lower interest rates are bringing prospective homebuyers who were previously on hold back into the market, and builders are already starting to feel the positive impact,” Freddie Mac said. “A rise in housebuilder confidence, followed by a rise in new home construction to its highest level since May, signals a response to meet increased demand as current inventories remain low.”
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