This number is down from 2-in-5 in 2021. For the report, Redfin considered a house to be affordable if it did not exceed 30% of the local county’s median income.
On a yearly basis, the number of affordable housing listings fell 53% in 2022, which was also the largest drop since Redfin began keeping track of the statistic in 2013. Some of this is due to a general drop in listings due to the “lock-in” effect—which is keeping people in their homes longer in fear of higher interest rates on new mortgages—but is also due to interest rates themselves, which are rising and reducing buying power.
According to Redfin, the housing affordability crisis has intensified for three primary reasons:
- Mortgage rates have more than doubled from the all-time low of 2.65% in 2021 as the Federal Reserve seeks to quell inflation. The average 30-year-fixed mortgage rate today is 6.65%, 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%, up from 2.96% in 2021.
- The pandemic homebuying boom caused home prices to surge, and they increased faster than incomes. While prices have fallen 12% from their May peak, they remain about 32% higher than they were before the pandemic started roughly three years ago.
- 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,” said Redfin Deputy Chief Economist Taylor Marr. “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% 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.”
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