Roughly one in five (21 percent) U.S. homes for sale in 2022 were affordable for the typical household, according to a new report from Redfin. That was down from 40 percent in 2021 and the lowest share on record.
A listing is considered affordable if the estimated monthly mortgage payment is no more than 30 percent of the local county’s median income.
The number of affordable listings fell 53 percent from a year earlier in 2022 — the largest annual drop in Redfin’s records, which date back to 2013.
While that’s partly due to a decline in listings in general — new listings fell 10 percent year-over-year — it’s mostly due to the fact that higher mortgage rates made the listings hitting the market less affordable, Redfin stated.
Redfin cited three primary reasons for the housing affordability crisis intensifying:
• Mortgage rates have more than doubled from the all-time low of 2.65 percent in 2021 as the Federal Reserve seeks to quell inflation. The average 30-year-fixed mortgage rate today is 6.65 percent, which has caused the monthly mortgage payment on the median-asking-price home to increase by over $500 from this time last year. The average rate in 2022 was 5.34 percent, up from 2.96 percent in 2021.
• The pandemic homebuying boom caused home prices to surge, and they increased faster than incomes. While prices have fallen 12 percent from their May peak, they remain about 32 percent higher than they were before the pandemic.
• There aren’t enough homes for sale, which is keeping prices afloat. There were fewer new listings in January than any month on record aside from April 2020, when the onset of the pandemic brought the housing market to a halt.
“Housing affordability is at the lowest level in history, which will widen the wealth gap — especially between millennials,” Redfin Deputy Chief Economist Taylor Marr said in a release. “Many millennials were able to buy their first home before or during the pandemic homebuying boom, but many others were priced out of homeownership and forced to keep renting. That means a lot of young adults missed out on a major wealth building opportunity: the value of homes owned by millennials has risen nearly 30 percent in the past year.”
Marr continued: “The good news is that housing affordability should improve. Mortgage rates will eventually come down as the Fed makes progress fighting inflation, and home prices have already begun falling. Incomes are also growing faster than the historical norm.”
Redfin’s data also showed that white households can afford three times as many homes as Black households.
Only 9 percent of homes for sale last year were affordable for the typical Black household, compared with 28 percent for the typical white household and the lowest share of any race in Redfin’s analysis.
The share was nearly as low for Hispanic/Latino households (14 percent) and was highest for Asian households (34 percent).
Affordability has also fallen slightly faster for Black households than for white households. The share of listings affordable for the typical Black household was cut in half (9 percent in 2022 vs. 18 percent in 2021), while the share affordable for the typical white household fell by less than half (28 percent vs 50 percent).
The number of listings affordable for the typical Black household dropped a record 57 percent in 2022 from the year before — a larger decline than any other race in Redfin’s analysis — while the number of listings affordable for the typical white household fell a record 49 percent. Hispanic/Latino and Asian households also experienced record declines in the number of listings affordable, according to Redfin.
“Housing has become incredibly unaffordable for a lot of Americans, but Black families have been hit especially hard because they’re often less wealthy to begin with,” Redfin Chief Economist Daryl Fairweather said. “On average, Black Americans earn less money, have less generational wealth, and have lower credit scores (and sometimes no credit scores at all) than white Americans. That makes it tougher to afford a down payment and qualify for a low mortgage rate. They also frequently face racial bias during the homebuying process.”
The racial housing affordability gap exists nationwide, from the least affordable to the most affordable.
In Detroit, for example, 33 percent of listings were affordable for the typical Black household last year — the highest share in the country. But that’s still less than half the share affordable for the typical white household (70 percent). In Los Angeles, one of the most expensive markets in the country, people across the board have a hard time finding affordable housing. Still, Black house hunters have fewer options. Close to zero (0.1 percent) listings were affordable for the typical Black household in 2022, compared with 2 percent for the typical white household.
There are a few slivers of good news, Fairweather said. The Black unemployment rate has been falling on a seasonally adjusted basis, helping to shrink the gap between the white and Black unemployment rates. Rent growth has also been slowing, which disproportionately affects Black Americans because they’re more likely to be renters.
Pandemic boomtowns and pricey coastal cities saw the largest declines in affordable homes.
The 100 most populous U.S. metro areas all had fewer affordable homes for sale in 2022 than in 2021, Redfin data shows.
In Boise, Idaho, the number of home listings affordable to the typical local household plunged 86 percent year-over-year. It was followed by San Diego (-85 percent), Salt Lake City (-84 percent), Oxnard, Calif. (-83 percent) and Austin, Texas (-82 percent).
Relatively affordable places saw the smallest declines in the number of affordable homes. In Detroit, the number of affordable listings fell 16 percent year-over-year in 2022. Next came Akron, Ohio (-24 percent), Cleveland (-25 percent), Pittsburgh (-27 percent) and Philadelphia (-28 percent).