Dive Brief:
- Only 21% of homes for sale in 2022 were affordable to the typical U.S. household, according to a report Thursday by real estate brokerage Redfin.
- That’s a marked decline from 2021, when the typical household could afford to buy 40% of U.S. homes for sale. It’s the largest one-year decrease in affordability and the lowest percentage of affordable homes Redfin has recorded since it started tracking home affordability in 2013.
- The lack of affordable housing will widen the wealth gap — especially between millennials,” Redfin Deputy Chief Economist Taylor Marr said in a statement. “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.”
Dive Insight:
Redfin considers a home affordable if the estimated monthly mortgage payment is no more than 30% of the local county’s median income. It found that the number of affordable homes listed for sale in the U.S. fell 53% from 2021 to 2022, mainly due to higher mortgage interest rates.
“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 report says.
Home prices have also grown faster than incomes during the COVID-19 pandemic. Prices remained 32% higher than they were before the pandemic, despite a 12% decline in prices since May.
Housing supply was an additional factor. Redfin noted that new listings fell 10% from 2021 to 2022.
“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,” the report says.
The lack of affordable homes hit Black households especially hard: The typical Black household could only afford 9% of homes listed for sale in the U.S. in 2022, Redfin said, while Hispanic/Latino households could afford 14% of homes for sale. White and Asian households fared significantly better, as they could afford 28% and 34% of homes listed for sale in the U.S., respectively.
“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 in a statement. “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.”
