US Markets
Thursday, December 7th, 2023 3:05 pm EDT
Key Points
- Record-High Affordability Challenges: According to a report by real estate company Redfin, 2023 was the least affordable year for homebuying in the past 11 years. Individuals with median income in the U.S. ($78,642) would have had to allocate over 40% of their income to monthly housing costs if they purchased a median-priced home around $400,000. This marks the highest share recorded by Redfin since 2012, showing an increase of nearly 3% from the previous year.
- Rapidly Increasing Housing Costs: Monthly costs for homebuyers surged at a rate more than twice as fast as wages, with the 30-year fixed mortgage rate reaching 8% in October, a level not seen since 2000. This occurred concurrently with a decrease in the number of available house listings on the market. Redfin’s analysis revealed that a typical homebuyer in 2023 needed an income of at least $109,868 to limit monthly housing payments to 30% of their income for a median-priced home. This record high reflected an 8.5% increase from the previous year and was $30,000 more than the typical household income.
- Regional Disparities and Future Predictions: Among cities analyzed, Austin was the only one that became more affordable in 2023, decreasing by approximately 1%. Conversely, several California metros, including Anaheim, San Francisco, and San Jose, were identified as the most expensive, leading residents in these areas to opt for renting due to soaring housing costs. In contrast, Midwest metros, such as Detroit, proved to be among the most affordable, with individuals making median income spending around 18% of their earnings on monthly housing costs. Looking forward to 2024, Redfin predicts a potential improvement in affordability, anticipating a decline in mortgage rates to around 6.6% and a 1% drop in housing prices as new listings enter the market. Redfin Senior Economist Elijah de la Campa stated that a “perfect storm” of inflation, high prices, soaring mortgage rates, and low housing supply characterized 2023 as the least affordable year for housing in recent history but expressed optimism, noting that affordability is already showing signs of improvement in the new year.
The year 2023 marked the least affordable period for homebuyers in the past 11 years, according to a report from real estate company Redfin. For someone earning the median income in the U.S. – $78,642 – purchasing the median-priced home at around $400,000 would have required spending over 40% of their income on monthly housing costs. This represents the highest share recorded by Redfin since 2012, reflecting an increase of nearly 3% from the previous year.
Monthly housing costs for homebuyers surged at a rate more than twice as fast as wages, driven by the 30-year fixed mortgage rate reaching 8% in October, a level not seen since 2000. This rise in mortgage rates occurred alongside a decrease in available house listings on the market.
In 2023, the typical homebuyer needed an income of at least $109,868 to limit their monthly housing payments to 30% of their income for a median-priced home. This record high marked an 8.5% increase from the previous year and was $30,000 more than the typical household income.
Redfin’s analysis revealed that Austin was the only city where affordability improved in 2023, decreasing by approximately 1%. In contrast, several California metros, including Anaheim, San Francisco, and San Jose, were among the most expensive. Residents in these areas were compelled to rent due to exorbitant housing costs.
Conversely, Midwest metros emerged as some of the most affordable, with a person in Detroit earning the median income spending only about 18% of their earnings on monthly housing costs.
Looking ahead to 2024, Redfin predicts a potential improvement in affordability. It anticipates mortgage rates to decline to around 6.6%, coupled with a 1% drop in housing prices as new listings enter the market.
Redfin Senior Economist Elijah de la Campa commented on the challenging housing market in 2023, attributing it to a “perfect storm” of inflation, high prices, soaring mortgage rates, and low housing supply. However, he expressed optimism, stating that affordability is already showing signs of improvement as the new year begins.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/12/07/2023-was-the-least-affordable-homebuying-year-redfin.html
