2023 has been the least affordable year to buy a home in Redfin’s records, but things are looking up for 2024, according to a report from the real estate brokerage.
Someone making the $78,642 median U.S. income in 2023 would’ve had to spend 41.4 percent of their earnings on monthly housing costs if they bought the $408,806 median-priced U.S. home. That’s the highest share on record and is up from 38.7 percent in 2022.
Data for 2023 goes through October, while data from past years spans the full year. When Redfin refers to a record high, that is referencing records dating back to 2012.
The typical 2023 homebuyer needed to earn an annual income of at least $109,868 if they wanted to spend no more than 30 percent of their earnings on monthly housing payments for the median-priced home. That’s a record high — up 8.5 percent from 2022 — and is $31,226 more than the typical household makes in a year.
“A perfect storm of inflation, high prices, soaring mortgage rates and low housing supply caused 2023 to go down as the least affordable year for housing in recent history,” Redfin Senior Economist Elijah de la Campa said in a release. “The good news is that affordability is already improving heading into the new year. Mortgage rates are coming down, more people are listing homes for sale, and there are still plenty of sidelined buyers ready to take a bite of the fresh inventory. We expect these conditions to continue to improve in 2024.”
Housing affordability has dwindled because wages haven’t increased as quickly as homebuying costs. The median monthly housing payment for homebuyers in 2023 was a record $2,715, up 12.6 percent from 2022. Over the same period, the median household income rose 5.2 percent to an estimated $78,642—also a record high, but not high enough to offset the jump in housing costs.
Monthly mortgage costs for homebuyers soared this year as the Federal Reserve raised interest rates to combat inflation. The average 30-year-fixed mortgage rate hit a 23-year high of 7.79 percent in October, and while it has since fallen to 7.22 percent, that’s still more than double the 2.65 percent record low hit during the pandemic, Redfin data shows.
Elevated mortgage rates have cooled homebuyer demand, but housing prices remain high because there aren’t enough homes for sale. The $408,806 median home sale price in 2023 is the highest of any year on record. Many homeowners are opting to stay put because selling and buying a new home would mean losing their low mortgage rate.
In Austin, Texas, someone making the $99,523 median income in 2023 would have had to spend 36.6 percent of their earnings on monthly housing costs if they bought the $456,950 median-priced home, down from 37.7 percent in 2022. That’s the only decline among the 50 most populous U.S. metropolitan areas.
The smallest increases were in Detroit (+0.7 ppts to 18.5 percent), Oakland, Calif. (+0.7 ppts to 53.3 percent), Phoenix (+0.9 ppts to 40.2 percent) and Las Vegas (+1.2 ppts to 43.8 percent).
Most of these places have something in common: affordability can’t get much worse because it has already become so strained.
Austin, Phoenix and Las Vegas exploded in popularity during the pandemic as remote workers flocked in, causing home prices to skyrocket. With so many people now priced out, costs have started coming back down to earth. Austin posted a bigger home price decline than any other major metro this year (-9.2 percent year-over-year). It is followed by Oakland (-5 percent), Phoenix (-4.1 percent) and Las Vegas (-3.6 percent), according to Redfin.
At the other end of the spectrum is Detroit, where someone making the median income in 2023 would’ve had to spend 18.5 percent of their earnings on monthly housing costs if they bought the median priced home—the lowest share among the metros Redfin analyzed. It’s followed by Pittsburgh (23.5 percent), Cleveland (23.8 percent), Philadelphia (23.9 percent) and St. Louis (25.2 percent). These five metros have lower median home sale prices than anywhere else in the nation—all below $300,000.
Housing costs have started to decline as mortgage rates have fallen; the typical homebuyer’s monthly payment was $2,575 during the four weeks ending Nov. 26, down from its peak last month but still up 13 percent year-over-year. New listings posted the biggest annual uptick in more than two years.
In 2024, Redfin predicts listings will climb further, mortgage rates will fall to about 6.6 percent, and prices will drop 1 percent.