High mortgage rates, low inventory and soaring home prices have made 2023 the most affordable year on record for homebuyers. The good news is that economists are predicting some improvement for next year. red fin The analysis was published on Thursday.
For an American earning a median income of $78,642 in 2023, purchasing a home priced at the median price of $408,806 would mean spending 41.4% of annual income on monthly housing costs. This means an increase from 38.7% in 2022.
“A perfect storm of inflation, high prices, soaring mortgage rates, and declining housing supply will make 2023 the worst year for housing affordability in recent history,” said Elijah de la Campa, senior economist at Redfin. ”, he said in the report.
According to Redfin’s research, one reason housing affordability has declined is because wages haven’t risen as fast as the cost of buying a home. The median monthly home payment in 2023 peaked at $2,715, an increase of 12.6% from 2022. Meanwhile, median household income rose only 5.2% to an estimated $78,642.
of federal reserve‘s restrictive monetary policy and rate hikes have contributed to the rise in mortgage rates this year. In October, the average interest rate on a 30-year fixed mortgage was 7.79%, a 23-year record.
Rising mortgage rates have dampened demand from home buyers, and a lack of existing home inventory has kept prices elevated despite fewer buyers in the market. According to Redfin, the median home sales price in 2023 was $408,806, the highest price ever.
Prices in Anaheim, California, and Miami will rise significantly in 2023
Anaheim, California, Miami, West Palm Beach, Florida, San Diego, and Newark, New Jersey recorded the highest declines in affordability in 2023.
For example, in Anaheim, California, you need 88.3% of your income to buy a home with a median price of $1,022,075, up from 80.2% in 2022. This was the largest increase recorded among the 50 most populous metropolitan areas.
Meanwhile, Detroit, Oakland, California, Phoenix, and Las Vegas had the smallest decreases in affordability.
Austin, Texas is the only metro to become more affordable in 2023, as home prices experienced the largest year-over-year decline (-9.2%).
Good news: affordability improves for 2024
Housing costs fell as mortgage rates fell in November. For the four weeks ending Nov. 26, the typical homebuyer’s monthly payment was $2,575, down from $2,739 the previous month but up 13% from a year ago.
“Mortgage rates are lower and more people are putting their homes on the market, but there are still plenty of buyers looking to take a bite of fresh inventory. We expect these conditions to continue to improve in 2024.” Delacampa said.
