Housing has become unaffordable for the majority of Americans. (iStock)
Mortgage rates are finally starting to come down, but large parts of the country remain unaffordable. According to a recent report from Redfin.
Only 15.5% of homes listed for sale in 2023 were considered affordable to the average U.S. buyer. This is the lowest share ever and is down from 20.7% in 2022. Before the pandemic, more than 40% of homes were under consideration. Redfin says it's affordable.
Affordability in this case means the estimated monthly mortgage payment does not exceed 30% of the county's median household income.
Despite lower mortgage rates, the typical mortgage payment is still $250 a month higher than it was in late 2022. Thankfully, housing experts are thinking positively about the near future.
“Many of the factors that made 2023 the lowest year on record to buy a home are starting to ease,” said Elijah de la Campa, senior economist at Redfin. “Mortgage rates have fallen below 7% for the first time in months, home price growth has slowed as more people have listed their homes due to lower interest rates, and overall inflation continues to cool. ” as buyers take advantage of lower mortgage rates and more properties are listed after the holidays. ”
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Mortgage interest rates have fallen significantly to the 6% range, and the housing market is cooling down.
Certain Americans are doing better than others
For some groups of Americans, housing is more affordable. According to Redfin, only 6.9% of homes sold in 2023 were considered affordable for the average Black household, compared to 27.4% for the typical Asian household. Among white households, the rate was 21.6%.
Hispanic and Latino households also face greater burdens when purchasing real estate. Only 10.4% of housing is affordable to the average Latino household.
These disparities arise from: Longstanding issues that tend to impact communities of color. Incomes have traditionally been low in these communities, and educational levels can also lead to higher-income opportunities. Combined, these make housing even less affordable than for the average white buyer.
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Newly built homes are popular among millennials despite high housing costs
Prices rise in cities with affordable housing
A city that once had a lot of affordable housing is seeing a decline in affordable housing.
According to a Redfin report, in 2022, 42.8% of Kansas City, Missouri homebuyers were able to afford a home, but by 2023, that percentage had dropped to 27.9%. This decline is the largest decline among metropolitan areas analyzed by Redfin.
Home prices in Greenville, South Carolina, fell by 14.1% from 2022 to 2023, and in Worcester, Massachusetts and Cincinnati, Ohio, they fell by 13.7%.
Racial disparities in affordable housing exist nationwide, even in more affordable metropolitan areas. According to a report by Redfin, Detroit offers some of the lowest mortgage rates in the country, yet only 31.8% of properties are affordable to the average Black family, and only 31.8% of properties are unaffordable to the average Latino family. The percentage was 50.2%. These numbers are low compared to the 66% affordability rate for white households.
There are various reasons for the rise in housing prices. Inflation, declining inventories, and lack of income growth are the main causes.. These combine to create a perfect storm that will lead to a decline in homeownership as costs continue to rise.
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